Home > Auto Loans > What Credit Score Do I Need to Get a Car Loan?

Comments 0 Comments
Advertiser Disclosure


Having a bad credit score can seem like a huge obstacle when you want to make a large purchase, and in many situations, it’s a deal-breaker. For example, getting a mortgage with a credit score lower than 600 (on a 300 to 850 score range) would be extremely difficult in the current market. With auto loans, things are a bit different.

“There is not a minimum score I could say,” said Rich Hyde, chief operating officer of Prestige Financial, an auto lender. “There are many lenders, many different opportunities, and there are many factors that go into an auto loan other than your credit score.”

Those things include your debt-to-income ratio, income-to-payment ratio, employment history and past experiences paying auto loans. Your ability to get a car loan also heavily depends on the kind of car you’re trying to finance, how much it costs and how much of a down payment you can make. The overall cost of the loan will vary depending on your monthly car payment and the loan term. Given the right mix of these elements you can still find auto financing despite having bad credit.

In the last few years, consumers with lower credit scores have increasingly found access to auto financing. In the last quarter of 2015, loan borrowers buying new vehicles had an average credit score of 711, down from 712 the previous year, according to data from major credit reporting agency Experian. (Experian uses the VantageScore 3.0 model, which has a scale of 300 to 850.) That average has gone down 6 years in a row, from its peak of 736 in 2009. People buying used cars tend to have lower credit scores than those buying new, but those borrowers’ average credit scores are also down from the in-recession peak of 659. In the fourth quarter of 2015, the average credit score on a used loan was 649, up a point from last year.

“We’re seeing the market kind of flatten out a bit,” said Melinda Zabritski, Experian Automotive’s senior director of automotive financing. “More consumers with lower credit score [are] able to get financing. Really the market has returned to what you would see pre-recession.”

Applying for Auto Loans

With so many auto lenders out there, each with a focus on different credit tiers, the issue with auto loans isn’t so much getting one as it is finding one that’s affordable. The lower your credit score, the higher your interest rate will likely be, and you’re probably also going to be limited in how much you can borrow.

If you want your pick of vehicle and auto financing, shoot for a credit score in the 700s, Zabritski said.

“Anything over 700, you’re much more likely to have a wide variety of offers, and typically if you’re above 720, typically you get the best offers,” she said. That’s when you start seeing incentives like 0% down or a promotional financing period.

Many common credit scoring models allow you to shop around for auto loans and count multiple inquiries in a short period of time as a single hard inquiry on your credit report. (Lots of hard inquiries can hurt your credit score.) Before you start looking at cars, see where your credit stands to get an idea of how you might look to a lender. You can see two of your credit scores for free each month on Credit.com. If your score is in bad shape, you may be able to improve your credit by disputing any errors on your credit report, finding out why your score is low and coming up with a plan to address those problems.

Once you are ready to secure financing, take the time to compare various offers to make sure you find a deal that’s best for your short- and long-term budget.

More on Auto Loans:

Image: Lisa F. Young

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team