Is 650 a Good Credit Score for a Car?

Understanding your credit score is a fundamental step when purchasing a car. It represents your creditworthiness, signaling to lenders your likelihood of repaying borrowed funds. For auto loans, this score directly influences approval and loan terms, including the interest rate you receive. A higher score indicates lower risk to lenders, leading to more favorable borrowing conditions.

Credit Score Ranges for Auto Loans

Credit scores, ranging from 300 to 850, are categorized into tiers that help lenders assess risk. Thresholds vary between scoring models (FICO, VantageScore) and lenders, but general ranges apply. An excellent credit score is 800 and above, indicating responsible credit management. Very good scores fall between 740 and 799, while good scores are from 670 to 739. These higher tiers qualify borrowers for the most competitive interest rates and loan terms.

Scores between 580 and 669 are classified as fair, and anything below 580 is poor. For auto loans, a “prime” credit score is 661 or above. The average VantageScore for new auto loan applicants is around 749, and for used auto loans, it’s around 687. Lenders establish their own minimum credit score requirements; a score of 600 is often a common threshold for approval, though terms will be less favorable.

What a 650 Score Means for Your Car Loan

A 650 credit score falls within the “fair” or “nonprime” category for most auto lenders. This score indicates you may present a moderate risk compared to those with higher scores. Obtaining a car loan with a 650 score is possible, but terms will likely be less advantageous than for borrowers with good or excellent credit.

Lenders offer higher annual percentage rates (APRs) to individuals with a 650 credit score, meaning more interest paid over the loan’s life. Prime borrowers might see average rates around 6.44% for new vehicles, while those with near-prime scores, including 650, could face rates around 8.99% or higher for used cars. This increased interest can add thousands of dollars to the total cost. Loan terms might also be longer, extending beyond 60 or 72 months, leading to lower monthly payments but more interest paid over time.

While a 650 score allows access to financing, lenders might also require a larger down payment to mitigate their risk, meaning you may need to put more money down upfront. Despite these considerations, a 650 credit score signifies that you are likely to be approved for an auto loan, though you should be prepared for less favorable financial terms.

Steps to Take Before Applying for a Car Loan

Before applying for a car loan with a credit score around 650, several steps can improve your chances of approval and secure better terms. Obtain your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) to review for inaccuracies. You are entitled to a free annual report from each bureau, and correcting errors can quickly boost your score. Regularly paying bills on time is paramount, as payment history is a significant factor in credit score calculations.

Understanding your debt-to-income (DTI) ratio is important, as lenders assess it to determine your ability to manage additional debt. This ratio compares your total monthly debt payments to your gross monthly income. While some lenders may approve loans with a DTI up to 45% to 50%, a lower ratio is more favorable and indicates less financial risk. You can improve this by reducing existing debt, particularly credit card balances, which also lowers your credit utilization rate.

Saving for a larger down payment can strengthen your loan application. Experts recommend a down payment of at least 10% to 20% of the vehicle’s value, reducing the amount borrowed and signaling greater financial commitment. A substantial down payment can lead to lower monthly payments and a better interest rate. If your credit score is a concern, considering a co-signer with a stronger credit history can improve approval odds and secure more favorable loan terms. Getting pre-approved from multiple lenders (banks, credit unions, online lenders) allows you to compare offers without impacting your credit score and provides leverage during dealership negotiations.