Is 696 a Good Credit Score to Buy a Car?

A credit score numerically represents an individual’s creditworthiness, summarizing their history of managing financial obligations. Lenders use this score as a primary indicator when assessing credit risk. It provides a quick snapshot of how reliably a borrower has handled past debts. A higher score generally indicates a lower risk of default, making an applicant more appealing to financial institutions.

Understanding Your 696 Credit Score

A 696 credit score falls into the “Good” category for most scoring models, including FICO and VantageScore. FICO Scores (300-850) consider 670-739 good, while VantageScore models (300-850) classify 661-780 as “Good” or “Prime.” This indicates a responsible credit history, making lenders generally willing to consider you for financing.

A 696 score positions you favorably for competitive car loan terms. Borrowers in this range can anticipate securing average interest rates, more favorable than those offered to individuals with lower scores. For example, in the first quarter of 2025, new car buyers with credit scores in the “Prime” range (661-780) saw average annual percentage rates (APRs) around 6.70% for new cars and 9.06% for used cars. This contrasts significantly with higher rates for “Subprime” scores.

A 696 score signals to lenders that you are a dependable borrower. While a higher score might unlock the lowest rates, a “Good” score allows access to various loan products. Lenders recognize a 696 as demonstrating timely payments and prudent credit management, leading to more attractive financing options compared to applicants with lower credit standing.

How Lenders Evaluate Car Loan Applicants

While a credit score is significant, lenders consider a comprehensive financial picture when evaluating car loan applications. They assess various factors to determine an applicant’s ability and willingness to repay the loan, extending beyond the numerical score. This ensures a thorough understanding of the borrower’s financial health and associated lending risk.

Lenders primarily consider the applicant’s income and employment stability. They look for a consistent, verifiable income stream to ensure monthly loan payments can be met. A stable employment history, often demonstrated by long tenure with an employer, reassures lenders of reliable repayment capacity. This stability indicates a reduced likelihood of payment disruptions.

Lenders also scrutinize an applicant’s debt-to-income (DTI) ratio, which compares total monthly debt payments to gross monthly income. A lower DTI ratio indicates less income committed to existing debts, suggesting more financial capacity for a new car loan. A DTI below 40% is considered favorable for loan approval, signaling less financial strain.

The amount of a down payment significantly influences a lender’s decision. A larger down payment reduces the amount borrowed, decreasing the lender’s risk exposure. A substantial down payment also demonstrates a borrower’s commitment to the purchase and can lead to more favorable loan terms, including lower interest rates.

The loan term and the vehicle itself are also evaluated. Shorter loan terms, while often resulting in higher monthly payments, pose less long-term risk for lenders and can sometimes come with lower interest rates. The vehicle serves as collateral, and lenders assess its value and potential depreciation. Newer vehicles or those with higher resale value are viewed as less risky collateral.

Navigating the Car Buying Process with a 696 Score

For individuals with a 696 credit score, a strategic approach to car buying can enhance the financing experience. Proactive steps help secure favorable terms and streamline the purchase process. Leveraging your credit standing is essential for maximizing savings and convenience.

Obtain Pre-Approvals

A first step involves obtaining pre-approvals from multiple lenders, including banks, credit unions, and online lenders, before visiting a dealership. Pre-approval provides a clear understanding of the maximum loan amount, estimated interest rate, and potential monthly payments. Knowing your financing terms beforehand offers considerable negotiating power at the dealership.

Compare Offers

Comparing offers from various financial institutions is paramount to securing the most advantageous interest rate and terms. Different lenders have varying criteria and rates. By obtaining several pre-approvals, you can identify the most competitive offer, potentially saving hundreds or thousands of dollars over the loan’s life. This comparison shopping applies to the annual percentage rate (APR), which includes interest and fees, for a true cost comparison.

Consider a Down Payment

A significant down payment can further improve loan terms. While not always required, a down payment reduces the principal loan amount, which lowers monthly payments and decreases the total interest paid over time. Aim for at least 10% to 20% of the vehicle’s purchase price. This can make you a more attractive borrower and potentially unlock better financing packages.

Review Your Credit Report

Before applying for any loans, review your credit report for accuracy. You can obtain a free copy annually from each of the three major credit bureaus. Checking your report allows you to identify and dispute any errors or inaccuracies that could negatively impact your credit score, ensuring lenders see a true reflection of your credit history. This proactive review helps prevent unexpected issues during the loan application process.

Focus on Total Loan Cost

When evaluating loan offers, focus not just on the monthly payment but also on the total cost of the loan, including the total interest paid. A longer loan term might result in lower monthly payments, but it leads to paying significantly more in interest over time. Understanding the overall financial commitment helps in making an informed decision that aligns with your long-term financial goals.