What Credit Score You Need to Buy a Car

The credit score you need depends on the type of loan

There is no single credit score that makes you may be able to access to buy a car. Different lenders set different minimums, and the score matters less than you might think — what matters more is what interest rate you will pay.

If you are financing through a bank or credit union, many will work with scores as low as 580 to 620, though you will pay a higher interest rate. Dealership financing (where the dealer arranges the loan) often accepts scores below 600. Some lenders specialize in bad-credit auto loans and may approve scores in the 500s. The catch: a score of 550 might get you approved, but at an interest rate of 15 to 20 percent instead of 4 to 8 percent.

If you are buying from a private seller and paying cash, your credit score does not matter at all. If you are leasing a car, the leasing company will usually check your credit but may have different standards than a lender — some require scores around 700, others will work with lower scores.

Key Takeaways

• Banks and credit unions typically want a score of 620 or higher, but will sometimes work with lower scores at a higher interest rate.
• Dealership financing and bad-credit lenders may approve scores below 600, though your monthly payment will be significantly higher.
• Your actual interest rate depends on your score, income, debt, and the lender's own rules — two people with the same score may get different rates.
• Paying cash for a car bypasses credit checks entirely, and buying from a private seller usually costs less than a dealership.
• Leasing a car typically requires a higher credit score than buying, often 700 or above, depending on the leasing company.

How your credit score affects your monthly payment

A lower credit score does not just mean rejection — it means you pay more per month. The difference is real money. On a $25,000 car loan over five years, a score of 750 might get you 5 percent interest ($471 per month), while a score of 600 might get you 12 percent interest ($567 per month). That is nearly $100 more each month, or $5,760 over the life of the loan.

Lenders use your credit score as one piece of information. They also look at your income, how much debt you already carry, how long you have worked at your current job, and whether you have a down payment. A score of 580 with a $5,000 down payment and stable income may get you better terms than a score of 620 with no down payment and a recent job change.

The interest rate you are offered is not final. You can shop around — different lenders will quote different rates for the same score. A bank may quote 10 percent, a credit union 8 percent, and a dealership 11 percent. Getting quotes from three to five lenders takes an hour and can save you hundreds of dollars.

Where to get a car loan if your score is low

If your score is below 620, you have several options. Credit unions often have lower minimums and more flexible rules than banks — if you are a member, start there. Some credit unions will work with scores as low as 500 if you have a co-signer or a down payment.

Online lenders and bad-credit auto loan specialists exist specifically for lower scores. LendingClub, Upstart, and Carvana offer financing to people with scores in the 500s and 600s. The interest rate will be high, but you will know the terms before you go to the dealership, which gives you power in negotiations.

Dealership financing is another route. The dealer works with multiple lenders behind the scenes and may be able to place your loan with one that accepts lower scores. The downside: dealership rates are often higher than bank or credit union rates, and dealers sometimes add fees. Always ask the dealer for the interest rate and total cost in writing before you sign.

A co-signer — someone with a higher credit score who signs the loan with you — can lower your interest rate or help you get approved when you otherwise would not be. The co-signer is legally responsible for the loan if you do not pay, so choose someone who understands that risk.

What happens if you improve your credit score before buying

If you have time before buying, raising your credit score can save you thousands. A 50-point increase from 600 to 650 might lower your interest rate by 1 to 2 percent, which on a $25,000 loan saves you $2,000 to $4,000 over five years.

The fastest ways to raise your score are paying down credit card balances (especially if they are near the limit) and making all payments on time for the next two to three months. Paying off a collection account or late payment does not erase it from your record, but it stops the damage from getting worse. Checking your credit report for errors — wrong accounts, accounts that are not yours, or incorrect balances — and disputing them can sometimes raise your score by 10 to 30 points.

Do not open new credit cards or take out new loans right before buying a car. Each new account lowers your score temporarily and signals to lenders that you are taking on more debt. Wait until after you have financed the car.

Understanding the difference between hard and soft credit checks

When you ask a lender for a rate quote, they may do a soft inquiry, which does not affect your credit score. When you actually apply for the loan, they do a hard inquiry, which lowers your score by a few points (usually 5 to 10 points). Multiple hard inquiries in a short time (within 14 to 45 days, depending on the scoring model) count as one inquiry, so shopping around for rates does not hurt as much as it sounds.

Ask lenders whether they will do a soft or hard inquiry before you agree. Many will give you a rate estimate with a soft inquiry first, so you can compare without damaging your score. Once you have narrowed it down to one or two lenders, then let them do the hard inquiry.

Buying a car with no credit or bad credit

If you have no credit history (never borrowed money before), you are in a similar position to someone with a low score. Lenders have no track record to judge you by. A credit union or bank may ask for a larger down payment or a co-signer. Some will give you a loan at a standard rate if you have a job and a bank account, because those show stability.

If you have bad credit from missed payments, collections, or bankruptcy, the options are narrower but not closed. Bad-credit auto lenders exist for this situation. Expect to pay 12 to 20 percent interest, and expect to put down 10 to 20 percent of the car's price. Some lenders require a down payment of $1,000 to $3,000 even on used cars under $10,000.

Buying a used car instead of new can lower the total amount you need to borrow, which makes the monthly payment manageable even at a high interest rate. A $10,000 used car at 15 percent over five years costs $237 per month. A $25,000 new car at the same rate costs $592 per month.

Frequently Asked Questions

Can I get a car loan with a credit score below 500?

Yes, but it is difficult. Bad-credit lenders and some dealerships will work with scores that low, though you will pay a high interest rate (15 to 25 percent) and may need a substantial down payment. A co-signer with better credit makes approval more likely.

Does checking my credit score hurt my score?

Checking your own credit score (a soft inquiry) does not hurt. Only hard inquiries from lenders lower your score. You can check your score free once a year at annualcreditreport.com, and many credit card companies and banks show your score for free in your account.

What if I have a bankruptcy on my credit report?

Bankruptcy stays on your report for 7 to 10 years, but lenders will consider loans as soon as two years after discharge. Your score will be low, but bad-credit lenders work with people in this situation. A down payment and stable income help your chances.

Should I get pre-approved before going to the dealership?

Yes. Getting pre-approved from a bank or credit union gives you a firm interest rate and shows the dealer you have other options. Dealers sometimes offer better rates when they know you can walk away. Pre-approval takes a few days and involves a hard inquiry, so do it before you start shopping.

Can I refinance my car loan later if my credit improves?

Yes. If your score rises significantly after you buy the car, you can refinance to a lower interest rate. Refinancing usually takes 30 to 60 days and involves another hard inquiry. It makes sense if the new rate is at least 1 to 2 percent lower than your current rate and you have at least two years left on the loan.