What Credit Score Is Needed To Buy a Car?

A car may be one of the biggest purchases you’ll ever make, so it’s important to feel confident you’re getting a good deal. Your credit can play an important role in how much you pay for your car if you’re using a loan to finance it. It’s worth preparing your credit prior to your car purchase and having a credit score goal in mind before you buy your next car.

What is a good credit score to buy car?

A good credit score for the VantageScore® 3.0 scoring model, which is the model used when you get a score directly from TransUnion, is in the range of 721 – 780. If your credit score is below this range, consider 721 and above a good long-term goal. Lenders may not use a VantageScore 3.0 credit score based on a TransUnion credit report when considering you for a loan. You can ask your lender which credit scoring model they use and which credit reports (TransUnion, Equifax, or Experian) they’ll pull. This is especially important if you have a credit freeze and need to temporarily unfreeze your credit for them to check your reports.

What is the minimum credit score for a car loan?

There’s no standard, minimum score to be approved for a car loan. For VantageScore as well as the FICO® scoring model, credit scores range from 300 – 850. As your credit score goes up, especially through the higher ranges, you can benefit from better odds of approval and lower interest rates. But just because your score isn’t “good,” that doesn’t mean you can’t be approved for an auto loan. Your approval will ultimately depend on the lender and the type of sale (whether it’s private or through a dealership). You may find approval varies from dealer to dealer.

Also, your credit score isn’t the only factor your lender looks at to make a lending decision. There are several things lenders may consider, including financial factors like your income and how much debt you have, to help them determine your ability to pay your loan.

Improve your credit score for buying a car

As noted above, there are multiple credit scoring models, but in general they tend to focus on similar factors to calculate your credit score. Your payment history and credit utilization are two of the most important factors. So continuing to make payments on time will help keep your credit health steady. Paying down your credit card balances, if you have any, can help you improve your credit score. Before any major purchase, it’s best to limit any other credit applications. While it’s not a major credit score factor, new credit applications can have a temporary negative impact on your score.

You should also read through your credit reports before you start shopping for a loan. It’s important your credit report is a true reflection of your credit history so your lender is getting the most accurate picture of your credit health. You don’t want any surprises in your report to be the cause for an application’s rejection. Checking your reports at all three bureaus is recommended. This is because not all creditors share the same information with each bureau.

Additionally, the dealer may also conduct credit checks on multiple bureaus through multiple lenders to obtain the best rate. If you find something inaccurate, you can dispute it online for free. Dispute investigations can take up to 30 days, so you want to review your report and start a dispute well before you start applying for loans.

How credit score affects auto loan rates

Your credit score can do more than just help you get approved for a loan, it can impact the interest rate as well.  A good credit score can mean significant long-term savings. With a higher interest rate, it can seem like you’re only paying an extra few dollars per month. While this may be true, it can add up to a significant amount over the life of the loan. For example, a change of just 1% can add up to hundreds and even thousands of dollars depending on how much was borrowed and the length of the loan.

How to save money on a car purchase

Improving your credit health is important, but it’s not the only way to save on a car purchase. If you’ve settled on a particular car and model, shopping around is always a smart idea. But did you know you can and should also shop around for financing? Shopping for a loan may help you secure the best interest rate possible for your financial and credit situation. Going into the dealership with a loan already means you don’t just have to use the lender and rate your dealership offers, though you can always accept their offer if it’s best.

Saving up for a larger down payment helps save money as well. The more you put down, the less you have to finance, which means you’ll save on interest charges. It’s also worth considering a modest car instead of something flashier, especially if car prices and interest rates are high. Cars may be a major purchase and can impact your finances significantly for many years. If you can ignore some flash and opt for a car that’s less expensive but still gets the job done, it may help you save serious cash over the lifetime of the loan.

How to get an auto loan with bad credit

You may still be able to buy a car if your credit is “bad.” VantageScore 3.0 labels scores of 601 – 660 as poor and 600 or lower as very poor. Even with poor credit, you can work with your dealer and lender to find a car in a price range that will work for you. To get a loan with poor credit, you may want to consider a less expensive car or save up to increase your down payment if possible. Shop around for loans ahead of time before you go to a dealership so you have an idea of what you can get approved for. In many cases, dealerships have relationships with different lenders to accommodate buyers across a range of credit scores. Preparing ahead of time will give you an idea of what a good deal is for your situation.  

If you’re struggling to get approved for a loan, you may consider applying with a co-signer. A co-signer, someone close to you with good credit, is a person who agrees to take responsibility for the loan with you. Being a co-signer is a serious commitment, since both you and your respective credit histories are on the hook for missed payments or default.

How auto loans affect your credit

Auto loans can impact your credit in multiple ways, and, if paid consistently, can help further build your credit history. As discussed earlier, applying for an auto loan can lower your score. Though because new credit applications don’t tend to be a highly influential credit score factor, this dip is usually slight and temporary.

The payment history is the real key to maintaining healthy credit with an auto loan. A 2022 TransUnion study, A Critical Eye on Auto Performance, showed a rise in auto loan delinquencies over the previous year. Missed payments can have a significant, negative impact on your credit score. So staying current with your auto loan account is important.

Also, because an auto loan is an installment loan, it can add to your “credit mix.” Your credit mix takes into account the different types of accounts you have. A diverse mix of active accounts can help your score, so if you don’t have many accounts or only have revolving accounts like credit cards, an auto loan can help. Familiarize yourself with the different credit score factors so you can better understand how your loans can impact your credit score.

When it comes to major purchases like a home or auto loan, you want to feel as confident as possible in your credit and financial health. Knowing how credit works and how to manage your credit can help you build that confidence and help save you money. If your credit is not where you want it to be, you can learn how to improve it with our blog, How to Rebuild Credit.

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

The credit scores provided are based on the VantageScore® 3.0 model. Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.

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