What Credit Score Do You Need to Buy a Car? Quick Reply

What Credit Score Do You Need to Buy a Car? It’s a common question for anyone hoping to buy a car. Your credit score may not affect your chances of buying a car as much as you think, but it will definitely affect your loan terms!

Here’s what you need to know before heading to the dealership.

What is the minimum score required?

There is no minimum credit score necessary to buy a car. So the answer to the question “What credit score do you need to buy a car?” is simply “it depends”. Past guidelines suggested a range of acceptable credit scores, from 600 to 660 to 720.

Many car loan providers make options available to those with both good (prime) and bad (subprime) credit scores. They can offer loans with no credit check at all.

However, a quality credit report will make buying a car easier and cheaper. While car lenders are more flexible these days, they are still cautious about taking on too much risk. Buyers with poor credit will pay higher car loan rates.

How Auto Lenders Check Credit Scores

When you apply for a car loan, the lender will submit your personal information to at least one of them three major credit institutions: Equifax, Experian and TransUnion. These agencies will check your credit history and submit a report to the lender.

This report reflects all aspects of your credit history. It includes your record of making monthly payments on time on credit cards and other bills, if any. The report will also outline the causes of your negative credit history, such as late payments, foreclosures, collection activity, bankruptcy and more.

The summary of all this information is yours FICO® credit score. This number is usually between 300 and 850. In 2022, the FICO average® the US score was 716(1). While different lenders have different criteria for their decisions, your number is a guide to determining loan terms and interest charges.

The score range is divided into different brackets or levels. So what credit score do you need to buy a car?

Auto Loan Credit Score Brackety

Your credit score will fall below one of the five categories below. Each classification corresponds to a defined annual percentage rate of interest. These “brackets” are loosely defined as follows.

781 to 850: Super Prime

Because buyers with the highest credit scores pose the least risk to auto loan providers and get the best interest rate deals. As of August 2023, the average annual percentage rate for a superprime buyer is 5.18%.

661 to 780: Bounty

A prime credit score ranks just below super prime. Borrowers in the prime group are still likely to have favorable interest rates: from August 2023 the average is 6.40%.

601 to 660: Near-Prime

Those with fair credit scores may have made the occasional late payment. They could also get more credit inquiries on their behalf or a thinner mix of credit sources. The average annual percentage rate for borrowers with a close prime rate is 8.86%. That’s not bad, but it’s a significantly higher cost over the life of the loan.

501 to 600: Subprime

This group of credit scores is the first level of “not good”. Although subprime borrowers can probably find an auto loan provider willing to work with them, interest rates are rising dramatically. As of August 2023, the rate is 11.53%.

300 to 500: Deep Subprime

The lowest level of credit score includes borrowers who have had multiple negative credit events. They may have experienced several efforts to collect, seize property, rechargegold bankruptcy. The current average interest rate for these higher credit risks is 14.08%.

It is still possible for people with risky and deep risky credit scores to get a loan. But along with high interest rates, they may also face tougher terms and restrictions from car loan providers.

How subprime and deep subprime scores affect auto loan terms

If you have a subprime or deep subprime credit score, you will face more rejections from auto loan providers. If you are approved, you will face more expensive, restrictive or limited loan terms.

  • Higher interest rates – As mentioned above, borrowers with subprime and subprime credit scores will pay higher interest rates than those with better scores.
  • Larger Advances – An auto loan provider may be happy to provide a subprime loan to a borrower who pays a significantly higher down payment on their car. This allows the lender to feel more secure about the borrower’s ability to make future payments.
  • Shorter loan terms – The creditor can set a shorter period for the borrower to repay the loan. This makes the borrower’s monthly repayments much higher. but it helps the lender limit its exposure to risk.
  • Higher costs – In addition to higher interest rates, a subprime borrower may face higher origination fees and administrative fees to offset the cost of the loan.
  • Prepayment Penalty – A lender can impose subprime penalties on a borrower if he manages to repay his loan ahead of schedule. Although these fees should be included in the loan agreement, they can still catch borrowers by surprise. Many borrowers do not read their loan agreements thoroughly.
  • Loan insurance – Lenders can request a subprime borrower or demand foreclosure credit insurance as protection against loan default.
  • Asset Forfeiture Tools – Borrowers with poor credit scores may be required to place GPS trackers and immobilizer devices on their vehicles. This allows the lender to disable the vehicle and easily find it if they want to repossess it.

“Buy here and pay here” option.

When considering what credit score you need to buy a car, people with subprime or deep subprime ratings have viable options such as “buy here pay here“loan. This type of loan does not come from a traditional lender. Instead, the loan is made and managed by the dealer where the car is purchased.

In a “buy here pay” loan agreement, the seller offers to finance the loan internally. It may even skip a credit check or offer favorable terms at short notice.

The car dealer will evaluate the maximum amount that he will lend to the buyer of the new car. This valuation takes into account the buyer’s income, as well as other factors such as the debt-to-income ratio.

The dealer will then find cars in his inventory that will cost less than the loan amount. After the borrower buys the car, he sends his monthly payments directly to the dealer.


The most obvious advantage of a buy here pay loan is easy qualification. Dealerships typically do not conduct credit checks. The loan is intended for a borrower with a suboptimal credit history.

The “buy here, pay here” loan is also very advantageous. Vendors typically make approval decisions quickly, often on the spot. There may be a low deposit or even no deposit. Paperwork for a buy-here-pay loan is often kept to a minimum.

➖ Disadvantages

There is significant risk with a buy here pay loan. If the dealership is willing to take it on, they need to find ways to mitigate that risk. This means passing on additional costs to the customer.

For example, a seller may price a car much higher than its market value. They will likely set significantly higher interest rates. Right now, the average rate for a “buy here, pay” loan is around 20%. The terms of such a loan are often inflexible.

A borrower’s credit standing can also take a severe hit. Since the seller usually doesn’t report to any of the credit bureaus, the loan won’t affect your credit score. Even if you make regular payments and eventually pay off the car, your score won’t improve. (Although some sellers will report missed payments to the authorities, which could hurt your score.) You also can’t use a buy-here, pay-here loan to diversify your credit portfolio.

It doesn’t end there. Repossession terms for a buy-here-and-pay loan are the strictest in the automotive industry. The timeline for a repo trade is usually extremely short and one late payment could trigger a repossession.

The borrower may be forced to take out credit insurance. If they get the car without a down payment, they are already in “negative equity” where they owe much more than the market value of the car. This immediately puts the loan under water and the seller can ask the borrower to take out gap insurance.

Additional financing options for subprime and deep subprime borrowers

The “buy here, pay here” loan option is fraught with risks for the borrower. But subprime customers still need cars. What other options do you have for obtaining a loan with an imperfect credit history?

1. Improve your credit score

You might think that this is “easier said than done”. But with patience, you can do it in small, mindful steps improve your credit score. Obvious ways to do this include making your payments on time, limiting your credit card usage, and monitoring your credit reports.

You can pay off pre-existing debts to eliminate them loan utilization ratio. Finally, you may be able to diversify your credit sources, which will improve your credit score.

2. Find a credit union

You can face different requirements if you want join a credit union. But if you meet the criteria, it can be a great option for car loan financing.

Credit unions are non-profit enterprises. This makes them more attentive and flexible to their customer base. In turn, the credit union may be much more willing to set favorable terms for a car loan, even with suboptimal credit.

3. Get a co-signer

A common solution for first-time car-buying teens with no credit history is to have their parents co-sign their loans. This option is also available to independent adults with bad credit.

Finding a co-signer for your new car will make loan approval easier. However, you must keep in mind that if you make late payments or defaults, this co-signer will be responsible for repaying the loan. This could be tricky at best and the end of the relationship at worst.

4. Make at least a 20% deposit

If you’re asking yourself, “What credit score do you need to buy a car?” and you know your credit history isn’t perfect, putting down a 20% down payment on a new car may be one of the best options you have. A down payment of at least 20% could be enough to change the mind of a reluctant lender.

5. Save cash

Of course, the easiest way to avoid getting into trouble with a car loan is to not get one. If you have the funds and time, consider building your cash reserves until you can afford a new or used car with no payments, no interest rate, and no threat of repossession.

Good credit, bad credit, no credit – there are options for everyone

What Credit Score Do You Need to Buy a Car? The answer varies from lender to lender, but no matter how depressing your credit history is, there is a way to get a car loan somewhere. Maintaining and improving your credit score is important, but is bad credit, you can find a car loan.

If you have to buy a car with bad credit, you will likely be dealing with a high interest rate. The best course of action in this case is to buy a used car, spend as little as possible and work to improve your credit so you can refinance with a cheaper loan or even upgrade your vehicle.

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