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What Credit Score is Needed to Buy a Car?

Buying a new car is exciting — so many models, colors and cool tech features to choose from. Don’t let credit score worries prevent you from financing the purchase of your dream machine!
This blog article covers what you need to know about the credit score for a car loan, so you can shop and buy with confidence!

The most common questions people ask are, “what credit score is needed to buy a car?” and “what is a good credit score for a car loan?”

According to the credit bureau Experian™, there are no industry standards that dictate which credit score a lender should use or what minimum score is needed. Lenders make their own policies for how they evaluate your credit and other financial factors.

As we’ll discuss in more detail, an individual’s credit score is used by lenders to measure the risk of lending money, in the form of a loan, to that individual.

What is a good credit score for a car loan? Generally, individuals with a lower credit score are considered to be at a higher risk of missing payments or not paying back the loan. Because of this, lenders will offer these individuals loans at higher interest rates to cover the lender’s potential loss, should the individual default on the loan.

Lenders look at individuals with high credit scores as a low-risk of defaulting on payments, and will offer lower interest rates as a reward for good credit.

But again, there is no minimum credit score for a car loan. Even people with bad credit can get a car loan, which is discussed in the article “How to Get a Car Loan with Bad Credit.”

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What Is Credit and Why Is it Important?

Credit is a central part of the loan application process, especially when it comes to making large purchases using credit, such as a car loan or home mortgage. All lenders, including credit unions and banks, use the applicant’s credit payment history and credit score to determine that individual’s ability to repay the loan.

How Credit Score Affects Your Auto Loan

If you’ve ever had a credit card, you have a credit history. Your credit history describes how you have used money in various ways, including: how many credit cards you have and use, how many loans you have had, and whether you pay your bills on time.

A credit scoring system awards points for each factor, such as on-time payments and length of credit history, which helps predict who is most likely to repay a debt. Not only is credit a consideration lenders use to determine eligibility to borrow, it plays a role in the interest rate you’ll be offered on a loan.

The most widely use credit scores are FICO® Scores, developed by Fair Isaac Company, Inc. FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

FICO Scores range between 350 (high risk) and 850 (low risk), as explained here:
Exceptional (800-850): Your score is well above the average score of U.S. consumers and clearly demonstrates to lenders that you are an exceptional borrower.

Very Good (740-799): Your score is above the average of U.S. consumers and demonstrates to lenders that you are a very dependable borrower.

Good (670-739): Your score is near or slightly above the average of U.S. consumers and most lenders consider this a good score.

Fair (580-669): Your score is below the average score of U.S. consumers, though many lenders will approve loans with this score.

Poor (300-579): Your score is well below the average score of U.S. consumers and demonstrates to lenders that you are a risky borrower.
What credit score is needed to buy a car? While each lender has its own criteria, the higher your credit score the easier it will be to get a loan. During the loan application process the lender will “pull your credit” and look at your scoring results. Your credit score reflects how you have managed your credit payments and credit history in the past.

An “exceptional” or “very good” credit score means that credit card and other debt payments were made on-time, and people with score in these ranges are considered a low risk of defaulting on a loan payment. “Fair” and “poor” credit scores generally result from having missed payments or non-payment, foreclosure on a property, or other financial shortfalls over time.
People with low credit scores can still get a car loan, however they will pay a higher interest rate because they are considered to be a higher risk of not making on-time payments.

Improving Your Credit Score

If you need to use credit to buy a car, but bad credit is preventing you from getting approved for a car loan, you can take steps to raise your credit score. The easiest way to build credit is to pay your bills on-time and pay-down debt. Learn the seven best ways to improve your credit score.

What to Do Before Applying for an Auto Loan

Before you start shopping for a new or pre-owned vehicle, there are steps you can take to improve your credit score for a car loan: 

1) Check Your Credit Score

To request your credit report visit Equifax®, Experian™, and TransUnion® are offering free weekly online reports through April 2021.

Or, you may contact each of the three major credit bureaus by phone:

Equifax: 800-685-1111 (option 3)
Experian: 888-397-3742
TransUnion: 800-916-8800 (option1)
If you find an error on your credit report you have a right to dispute the inaccuracy. There is no cost or fee to dispute mistakes or outdated items on your credit report. You don’t need to hire a credit repair company to do this for you. Simply contacting the credit bureau may resolve inaccuracies and may result in a credit score increase. 

2) Research Lenders:

Not all lenders use the same lending guidelines, which mean interest rates can vary. Look for lending promotions. Credit Unions, including CU SoCal, tend to offer lower interest rates on loans than banks. Car dealers offer car loans through partnerships with lenders. Be sure to compare all of your options before you buy! 

3) Save For A Down payment

Saving for a down payment on the car you want is a great way to get started. Making a down payment will reduce the total amount you owe on the purchase. Because you’ll be paying interest on a smaller loan amount, your monthly payments will also be lower. 

4) Get Preapproved

With a loan pre-approval in-hand you’ll know how much you can spend on a new car, which will make shopping easier. A pre-approval from CU SoCal will let you shop with confidence.

Why Savvy Consumers Choose CU SoCal

We understand you’re more than a credit score, which is why CU SoCal lends on character and not just on credit scores. If you’ve been turned down for a car loan because of a low credit score, we can help.

Get Pre-approved for a CU SoCal Auto Loan Today!      

At CU SoCal, our members have access to a wide range of loan options and that includes car loans for people with bad credit.
Credit Union of Southern California provides financial services, including auto loans, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.

Call 866-287-6225 to speak with one of our friendly, knowledgeable associates.

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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