Skip to Content
Tally logo

What Credit Score Do You Need to Buy a Car?

Financers use credit history to determine auto loan approval. Here’s the credit score needed to buy a car.

September 30, 2022

In the market for a new or used car? Unless you have a lot of cash, you will likely need to borrow money to buy it. 

One factor that auto financing companies use to determine whether to give you an auto loan is credit score. So, what credit score do you need exactly to buy a car? What are your options if your credit score doesn’t meet the required threshold? 

Here’s what you need to know.

What credit score do you need to buy a car?

You’ll likely need a credit score of at least 661 to qualify for most conventional car loans. According to Experian’s State of the Automotive Finance Market Report, 65% of cars financed were for people with a prime credit score (people with FICO credit scores of 661 and above).

So does that mean you are doomed if your score is not at least 661? Not exactly.  

Different lenders usually have their standards for evaluating credit and finances to determine whether to approve someone for a loan. There’s no one magical number that guarantees approval or disqualifies you from a car loan.

Even if you have a poor score, you might still be able to find a company that’s willing to work with you, as evidenced by the fact that as much as 17% of all car financing in Q2 was to people with subprime credit scores (580 to 660) according to Experian. 

If you are leasing a car, you may need a higher credit score than buying a car using an auto loan. 

How will credit score impact my car loan?

A credit score is simply a 3-digit number score calculated using the information in your credit report that gives a snapshot of your reliability as a borrower. 

For example, your credit score indicates your likelihood of repaying the lender based on history when applying for a car loan. Lenders also use your score to determine interest rate. Typically, the higher your credit score, the better the rate you will get.

A good credit score can potentially save you thousands of dollars worth of interest over the loan’s lifetime. 

For example, if you are in the subprime category and planning to buy a used car for $20,000. You make a down payment of $5,000 and then repay the loan in 60 months. If your interest rate is 20.43%, you will have paid a total interest of $9,060.34 by the end of the loan term, nearly half the cost of the car. 

Alternatively, if your score is in the subprime category and you get the same loan at a rate of 3.68% (assuming you still make a down payment of $5,000), the total interest over the loan’s term will only be $1,445.22. That translates to interest savings of over $7,600. That’s a lot of cash that you can use to accomplish other goals. 

How can I get a car loan with a lower credit score?

While having a low credit score is not a deal-breaker when it comes to getting an auto loan, it can still make things difficult.

Here are a few things you can do to improve your approval odds.

Get a co-signer

A co-signer promises to repay a loan if you fail to make payments or default on the loan. The p co-signer is often a family member or close friend with a good credit score. It can increase the lender’s willingness to give you a loan.

Naturally, if you manage to get a co-signer, make sure you commit to making payments on time. Otherwise, you risk damaging your co-signer's credit score since any late payments will also show up on their credit record.

Look for a lender who specializes in low credit scores

Some lenders specialize in offering loans to people with bad credit and may be willing to work with you even if your credit score is low.

The downside of these loans, unfortunately, is that they usually come with sky-high interest rates and fees. If you choose to work with a lender who specializes in giving loans to people with bad credit, make sure to shop around extensively and compare different options first to increase your chances of getting the best deal possible. 

Put down a large down payment

A large down payment on the car loan shows that you have skin in the game. It also reduces the amount you need to borrow and can make you look less risky to lenders. As a result, more lenders might be willing to work with you and possibly even offer you a low-interest rate.  

Purchase a more affordable car

Another simple but effective strategy to get a loan with bad credit is to go for a less expensive car. The less you need to borrow, the higher the chances that a lender will be willing to work with you.

How can I increase my credit score for a car loan?

Establishing a good credit rate before you apply for a car loan can improve your chances of getting approved. If your score is not that great, here are a few simple things you can do to improve it. 

Paying bills on time

Your payment history is the most critical factor that credit bureaus use to compute your credit score. According to myFICO, your payment history affects up to 35% of your score. Aneasy way to keep your score in good shape is always to pay your bills on time. Making payments on time ensures you don’t get hit with late fees and penalties that can make paying your debts even harder.

Consider automating your payments to ensure that they always go through on time. You can also set up reminders on your phone to notify you when it's time to make a payment.

And once you have your car loan, continue to make timely payments on it to boost your credit score even further.

Paying down debt

Credit utilization is another factor that significantly impacts your credit score. Credit utilization refers to how much of your available credit limit you are using. To get and maintain a good credit score, experts generally recommend using no more than 30% of your available credit at any time. So if your current credit usage is above this figure, work on bringing it down by paying down some of your debt.

If you are having trouble paying down your credit card debt, tools like Tally† can help. Tally consolidates high-interest credit card debts into one low-interest loan, helping pay off what you owe faster and save money.  

Reviewing credit score for errors

Lenders and credit reporting bureaus sometimes make errors when compiling or recording your credit information. Unfortunately, errors or inaccuracies in your credit report can lower your credit score and thus cause lenders to deny you loans. 

Before you apply for a loan, order copies of your credit report from all three credit bureaus and thoroughly review them for any errors or inaccuracies. If you find any, contact the lender and the credit bureau responsible for the mistake and ask for its removal.  

Bottom line

When it comes to the question of “what credit score do you need to buy a car,” if you are in the market for a car, your credit score will significantly impact the financing options available to you. Consequently, it pays to check your score and know where you stand before you apply for a car loan. You may be able to increase your financing options by taking steps such as:

  • Paying your bills on time

  • Reducing your overall debt

  • Correcting errors on your credit report to boost your score

For more financial guidance and money tips delivered right to your inbox, sign up for the Tally Newsletter

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.