Published on Apr 05, 2025 6 min read

What Credit Score Do You Need to Get an Auto Loan?

Getting an auto loan often depends on your credit score, as it helps lenders understand how reliable you are with finances. A higher credit score can improve your chances of getting approved and might even get you better interest rates. However, people with lower credit scores can still qualify for loans, though terms may be less favorable. This guide explains what credit score you might need for an auto loan, helping you better prepare for the car-buying process.

What Is a Credit Score?

The three-digit credit score demonstrates your creditworthiness and records your financial past activity. Your credit score depends on what appears in your credit report with emphasis on payment details and debt amounts and time since first opening accounts and credit types available and fresh applications by creditors. The scoring model most often employed for creditworthiness assessment is FICO (also known as Fair Isaac Corporation) that spans scores from 300 to 850. The risk level for lenders depends on credit score value where higher numbers show less risk and lower numbers lead to increased risk.

Minimum Credit Score Requirements for Auto Loans

While there isn't a universal minimum credit score requirement for auto loans, most lenders have their own standards. According to Experian's State of the Automotive Finance Market report, the most commonly used credit score ranges are:

• Superprime: 781-850
• Prime: 661-780
• Nonprime: 601-660
• Subprime: 501-600
• Deep subprime: 300-500

However, these ranges may vary depending on the lender and other factors such as income, debt-to-income ratio, and down payment amount. Some lenders may also have specific requirements for different types of vehicles or loan amounts.

How a Lower Credit Score May Affect Auto Loan Terms

If you have a lower credit score, you may still be able to qualify for an auto loan, but the terms and conditions may not be as favorable compared to someone with a higher score. Here are some potential impacts of having a lower credit score:

• Higher interest rates: Lenders may see you as a riskier borrower and compensate by charging higher interest rates.
• Larger down payments: To offset the risk of lending to someone with a lower credit score, lenders may require larger down payments.
• Shorter repayment term: Some lenders may offer shorter repayment terms for borrowers with lower credit scores, meaning higher monthly payments.
• Fewer options: You may have fewer loan options available compared to someone with a higher credit score.

Improving Your Credit Score for an Auto Loan

If you're planning on getting an auto loan in the future, it's important to work on improving your credit score. This can help you qualify for better loan terms and potentially save you money in the long run. Here are some ways to improve your credit score:

• Make timely payments: Payment history is a significant factor in determining your credit score. Be sure to pay all bills on time, including credit card payments, loans, and utilities.
• Keep credit utilization low: Aim to keep your overall credit card balances below 30% of the credit limit to maintain a healthy credit utilization ratio.
• Limit new credit inquiries: Every time you apply for new credit, it can have a small negative impact on your score. Limit new inquiries unless necessary.

Options for Borrowers with Low Credit Scores

If you have a low credit score and are struggling to get approved for an auto loan, here are some options you can explore:

• Look into alternative lenders: Alternative lenders may have less strict requirements compared to traditional banks and may be more willing to work with borrowers with lower credit scores.
• Consider a cosigner: A cosigner with a higher credit score can strengthen your loan application and potentially help you qualify for better terms.

How Credit Score Can Impact Your Overall Car-Buying Experience

Having a good credit score not only affects your chances of getting approved for an auto loan but it also plays a role in other parts of the car-buying process. For example, having a higher credit score may help you:

• Negotiate better prices: With a lower interest rate, you can save money on overall interest charges and potentially negotiate a better price with the dealership.
• Qualify for manufacturer incentives: Some manufacturers offer special financing rates or discounts to customers with high credit scores.
• Get approved for leases: Leasing companies often have strict requirements for credit scores, so having a higher one can improve your chances of getting approved for a lease.

Tips for Getting the Best Auto Loan

Regardless of your credit score, there are steps you can take to ensure you get the best auto loan possible:

1. Shop Around for Lenders

Each lender has different terms, interest rates, and requirements, so shopping around can help you find the best deal. Don’t just settle for the first offer—take the time to evaluate all your options before making a decision.

2. Get Preapproved

A loan preapproval can give you a better understanding of what you can afford and show sellers that you’re a serious buyer. This can also help you stay within budget during the car-buying process.

3. Negotiate Loan Terms

Don’t be afraid to negotiate the terms of your loan with lenders. You might be able to secure a lower interest rate, longer repayment term, or reduced fees by simply asking and being persistent. Negotiation can save you money over the life of the loan, so make sure to advocate for yourself.

4. Understand the Total Cost of Ownership

When comparing auto loan offers, don’t just focus on the monthly payment. Consider the total cost of ownership, including interest charges, fees, insurance, taxes, and maintenance. This will give you a clearer picture of how much your vehicle will truly cost over time and help you make a more informed decision.

5. Improve Your Financial Standing Before Applying

If you’re not in a rush to buy a car, consider taking time to improve your financial health before applying for an auto loan. Boosting your credit score, saving for a larger down payment, or reducing existing debt can all increase your chances of securing better loan terms.

Final Thoughts

Taking out an auto loan is a significant financial commitment, and preparation is key to making the best decision for your situation. By understanding your budget, researching lenders, and considering the true cost of ownership, you can ensure that your purchase supports your financial goals rather than straining them. Always take your time, compare options, and advocate for yourself to secure the best possible deal.