What Car Can I Get With a 600 Credit Score?

Acquiring a car with a 600 credit score is a common objective, but is achievable. This guide explains the implications of a 600 credit score on auto financing, details the necessary steps for preparing a loan application, and provides insights into navigating the car buying process. Understanding these aspects helps secure a car loan and manage associated costs.

Understanding Your Credit Score’s Impact

A 600 credit score places a borrower in the “subprime” category. Lenders categorize scores, with 501-600 considered subprime, and 300-500 as deep subprime. This classification signifies a higher perceived risk for lenders, as borrowers in this range may have a history of missed payments or limited credit experience.

Subprime scores mean higher interest rates compared to prime or super prime borrowers. For instance, a super prime borrower might see interest rates around 5.61% for a new car, while a subprime borrower could face rates closer to 11.86% or higher. These elevated rates compensate lenders for the increased risk of default, significantly increasing the loan’s overall cost. Due to this higher risk, lenders may also prefer shorter loan durations or require a larger down payment.

Subprime auto loans are designed for individuals with lower credit scores or limited credit histories, providing an avenue for vehicle financing that might otherwise be unavailable. While traditional banks might be hesitant, specific subprime lenders and some credit unions are more accessible. These lenders consider factors beyond the credit score, such as income and employment stability, to assess a borrower’s financial situation.

Preparing for a Car Loan Application

Preparation is important for a car loan application, particularly with a 600 credit score. Gathering required financial documents streamlines the process and demonstrates readiness. Proof of income and employment is a primary requirement, including recent pay stubs, W-2 forms, or tax returns. Self-employed individuals might need to provide tax returns for the past two years or 1099 forms and bank statements.

Lenders require proof of address, verified with utility bills, bank statements, or a driver’s license. Providing an updated driver’s license and Social Security number allows lenders to access credit reports and verify identity. Proof of insurance is necessary before finalizing the loan, assuring lenders their investment is protected.

Checking your credit report for accuracy before applying can identify and correct discrepancies. Consumers are entitled to a free copy of their credit report from each of the three major credit bureaus annually. Understanding the report helps anticipate how lenders will view creditworthiness.

A realistic car budget considers monthly loan payments and total ownership costs. These expenses include insurance premiums, fuel, and maintenance. While a general guideline suggests car expenses, including insurance, should not exceed about 10% of gross income, higher interest rates with a 600 score may push this percentage higher. A substantial down payment can significantly improve loan terms by reducing the loan amount and demonstrating financial commitment.

A co-signer can improve loan approval chances or secure more favorable terms for a 600 credit score borrower. A co-signer, typically with stronger credit, shares loan responsibility, reducing lender risk. However, the co-signer becomes equally responsible for the debt, impacting their credit if payments are missed.

Navigating the Car Buying Process

With preparations complete, navigate the car buying process. Seeking pre-approval from lenders provides clarity on loan terms before visiting dealerships. Pre-approval means a lender has reviewed your financial information and provisionally approved a loan amount and interest rate. This process often involves a “hard credit inquiry,” which can temporarily lower a credit score by a few points, but multiple inquiries within a short timeframe (typically 14 days) are often counted as a single inquiry by credit scoring models.

A pre-approval letter offers several advantages, including a clear budget for car shopping and enhanced negotiating power. It allows the buyer to focus on the vehicle’s price rather than monthly payments, as financing is largely determined. Dealerships may attempt to offer their own financing, and pre-approval provides a benchmark to compare against, ensuring a competitive rate.

When approaching dealerships or private sellers, test driving vehicles assesses comfort and functionality. Asking questions about the vehicle’s history, such as accident reports or maintenance records, is important. For used cars, inquiring about previous owners and any outstanding recalls can provide valuable insights.

Negotiate the car’s “out-the-door” price, including all fees and taxes, rather than just the monthly payment. Researching the market value using online tools helps make an informed offer. Non-negotiable fees include sales tax, vehicle registration, and title fees, which are government-mandated. However, some dealer-specific fees, like documentation fees or certain add-ons, may be negotiable.

Finalize the purchase by reviewing all contracts carefully before signing. The Buyer’s Order and financing agreement should detail the agreed-upon price, interest rate, loan term, and all associated fees. Common fees include destination charges, documentation fees, and sales tax, which can add 8% to 10% to the car’s price. Understanding each line item and asking for clarification ensures a transparent transaction.