What Credit Score Do You Need to Get a Car Loan?

A credit score is a numerical representation of an individual’s financial reliability, playing a significant role in securing various types of loans. For car loans, this three-digit number helps lenders evaluate a borrower’s ability to repay. A higher credit score signals a lower risk to financial institutions, potentially unlocking more favorable loan terms and interest rates. Understanding how your credit profile impacts auto financing is an important step in the car-buying process.

Understanding Credit Scores for Car Loans

Credit scores, such as those from FICO and VantageScore, typically range from 300 to 850, with higher numbers indicating greater creditworthiness. Lenders utilize these scores to quickly assess the likelihood of a borrower repaying their debt. While there is no universal minimum score required for a car loan, most lenders consider scores above 660 to be in a desirable range for competitive rates. For instance, a FICO score of 670 to 739 is considered “good,” 740 to 799 is “very good,” and 800 and above is “exceptional.”

Conversely, a score between 580 and 669 is categorized as “fair,” and anything below 580 is deemed “poor” credit. Auto lenders also use industry-specific FICO Auto Scores, which can range from 250 to 900. These specialized scores place greater emphasis on past automotive credit behavior, providing a more tailored risk assessment for vehicle financing. While financial institutions have their own internal thresholds, these general ranges provide a useful guide for borrowers.

How Credit Scores Influence Car Loan Offers

Your credit score directly impacts the terms and conditions offered for a car loan, primarily influencing your interest rate. Lenders assess your score to gauge the risk associated with lending you money; a lower score suggests a higher risk of default, prompting them to charge a higher annual percentage rate (APR). This significantly impacts the total cost of the vehicle over the loan term. For example, in the first quarter of 2025, the average interest rate for a new car loan was 5.18% for borrowers with excellent credit (781-850), while those with poor credit (300-500) faced an average rate of 15.81%.

For used car loans, the disparity is even more pronounced, with excellent credit borrowers seeing average rates around 6.82% and poor credit borrowers facing rates as high as 21.58%. Higher interest rates mean a larger portion of your monthly payment goes towards interest, increasing the overall amount paid for the car. Beyond interest rates, a strong credit score can also influence the maximum loan amount you qualify for and the flexibility of loan terms, such as repayment periods. Lenders offer larger sums and longer terms to borrowers with established histories of timely payments, reflecting lower perceived risk.

Preparing Your Credit for a Car Loan

Before applying for a car loan, review your credit reports and understand your current credit standing. You can obtain a free copy of your credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Examining these reports allows you to identify inaccuracies or errors that could negatively affect your score. If you find discrepancies, dispute them with the credit bureau promptly to ensure your report accurately reflects your financial history.

Beyond your credit score, lenders also consider other financial metrics, such as your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments to your gross monthly income, indicating your capacity to take on additional debt. A lower DTI ratio, ideally below 36% to 43%, signals to lenders that you have sufficient income to manage new car payments alongside existing obligations.

Applying for a Car Loan with Various Credit Profiles

When you apply for a car loan, lenders review your credit profile to determine eligibility and terms. For individuals with excellent or good credit scores, the application process is straightforward, leading to competitive interest rates and favorable loan conditions. These borrowers can expect quick approval and access to the widest range of financing options from banks, credit unions, and direct lenders. Shopping for pre-approvals from multiple lenders can help secure the best possible rate.

For those with fair or poor credit, obtaining a car loan presents more challenges, but it is still possible. Lenders specializing in subprime auto loans cater to these profiles, though interest rates are significantly higher to offset increased risk. In such cases, securing a loan with a co-signer who has a stronger credit history can improve approval chances and potentially lower the interest rate. Another consideration is dealer financing, including “buy here, pay here” dealerships, which offer loans directly but often come with higher rates and may not report payments to all credit bureaus, limiting credit-building opportunities.