What credit score is needed to buy a car?

A car is an expensive purchase that often requires financing. Nearly 80% of new car buyers took out a loan or a lease in 2023, according to Experian, as did almost 38% of used car buyers. 

Your credit history significantly impacts whether you’ll get approved for a loan and what your rate you’ll be offered. But lenders calculate credit scores for auto loans differently than they do for a credit card, mortgage or personal loan or other forms of debt.

Knowing how your score is determined and what score to aim for can help make the process less painful and confusing.

There are two types credit-scoring models that lenders often use to evaluate borrowers: the FICO® Score and the VantageScore®.

When it comes to car buying, a number of lenders use the FICO Score 8 and 9 or VantageScore 3.0. However, there is also an industry-specific score that many lenders use, known as the FICO Auto Score. Auto Scores range from 250 to 900 (compared to 300 to 850 for the base FICO score). 

Industry-specific scores are optimized for certain types of credit products, so the Auto Score factors your past history with car payments, for example.

If you are getting ready to apply for a car loan, you should ask the lender what credit scoring system they use.

You can check your FICO Auto Score using MyFICO, which has both a free option and paid tiers with more features, like specific scores for mortgages and auto loans and $1 million identity theft insurance.

There are other free online resources to get your credit scores. They’re less focused on auto financing, but can give you a baseline for understanding what interest rate you may qualify for.

There is no magic number that will guarantee you get approved for a loan, but in the auto finance market, borrowers are grouped into different ranges. Experian uses five categories:

• Super prime: 781 to 850
• Prime: 661 to 780
• Nonprime: 601 to 660
• Subprime: 501 to 600
• Deep subprime: 300 to 500

In the second quarter of 2024, about 80% of buyers fell into the prime or super prime range, according to Experian. The average credit score for new vehicle buyers was 753 and for used car buyers it was 689.

This is a steady increases since 2019, when the average scores were just 737 for a new car and 655 for a used one.

Using September 2024 data in the myFICO loan calculator, we can see that someone with a score of between 720 and 850 who takes out a $40,000 loan over 60 months would get an average APR of 7.45% That works out to a payment of $801 per month, with $8,034 in interest over the life of the loan.

A borrower with a score between 500 to 589, however, would be hit with an average APR of 17.774 % and pay $1,011 per month, with $20,650 in total interest. If you worked to raise your credit score to between 590 and 619 before applying, you could save approximately $1,140 over the life of your loan.

You can still get an auto loan with bad credit, but it might be harder to get approved and your rate will probably be higher — especially if you fall into the subprime or deep subprime range.

If you have bad credit, here are some tips for getting approved: 

Shop around

Compare the rates between different lenders to see which can offer you the lowest rate and best terms. Don’t forget to account for administrative or origination fees, which can vary by lender.

Capital One Auto Finance is a good choice if you have less-than-stellar credit, with competitive rates and an Auto Navigator tool that lets you shop for cars and prequalify without a hard pull on your credit.

Look for subprime or second-chance car loans

If you are not having success getting traditional financing through a dealer or a bank, you can try a subprime lender that specializes in financing for buyers with spotty credit. 

“Buy here, pay here” lots offer second-chance car loans — or you can try an online marketplace like Autopay, to shop for subprime car loans. In either case, your rate and fees will likely be significantly higher since these loans are considered riskier by lenders.

Get a co-signer

A co-signer agrees to be legally responsible for the debt if the primary borrower fails to make payments. If your co-signer has a good credit score, it can make it easier to get approved for a loan with a lower interest rate.

Keep in mind that not all lenders accept co-signers, so you may need to shop around to find one. And make sure your co-signer understands the obligation they’re agreeing to.

If your credit score is not high enough to get a good interest rate on an auto loan, there are ways to improve it.

Pay your bills on time

Your payment history is extremely important to your credit score, as it makes up 35% of FICO’s overall calculation. Every on-time payment helps improve your credit score, especially if you are paying a balance in full.

Keep your credit utilization down

Your credit utilization rate, or the amount of available credit you’re using, makes up 30% of your FICO score. If you’re using $5,000 of your $10,000 credit limit you have a 50% credit utilization ratio. Lenders typically want to see a rate of 30% or less on revolving credit accounts.

Keep your oldest credit card open

The age of your credit history makes up 15% of your FICO score. Keeping your oldest cards open increases the average age of your accounts and helps raise credit score. At the same time, try to avoid opening new accounts, which can lower the average age of your accounts and lower your score.

Be an authorized user on someone’s account

If you have a family member or friend with good credit and who is willing to add you to one of their credit card accounts as an authorized user, it can help you build credit or boost your existing score. When you become an authorized user, the credit card account is added to your credit report. So if the primary cardholder has a solid history of responsible card usage, this will positively impact your credit score.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every car loan article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of car loans. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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