What Is A Decent Credit Score To Buy A Car
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What Is A Decent Credit Score To Buy A Car
While there is no specific minimum credit score to buy a car, your credit rating is an important factor in the financing approval process and determining your interest rate. In fact, according to FICO, most auto lenders use what's called a FICO Auto Score as part of their lending decision[1].
If you are wondering, "What is a good credit score to buy a car?" you have come to the right place. Your credit score matters a lot when buying a car. Let's take a look at what you need to know about credit history and auto financing.
According to Experian data in the second quarter of 2021[2], the lowest auto loan rates are reserved for people with a higher credit score above 780 (also known as a prime credit score). Borrowers with a subprime credit score below 500 have difficulty getting approved for car financing.
These borrowers may struggle to qualify for a car loan. If you do qualify, you can count on paying the highest interest rates. Borrowers with very poor credit scores typically have many late or missed payments, bankruptcies, or other serious negative information on their credit report. Borrowers in this range would pay around 14.4% for a car loan, according to Experian.
Very good credit scores are typically reserved for borrowers with a history of on-time payments and low credit balances. These borrowers typically have multiple credit accounts and a history showing they can manage multiple accounts with on-time payments and get close to the best interest rates available.
If you are worried about being subprime and getting approved or just want to save money with a lower interest rate, you can take action today to improve your credit score. First step? Check your credit report from the credit reporting agencies (you can get a free copy every 12 months from each bureau at annualcreditreport.com) to see where you stand and how you can improve your credit rating.
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While there is no official minimum credit score required to apply for auto loans, lenders have minimum standards that they look for when reviewing your application. And, as a general rule, the lower your credit score, the more interest you will be charged.
The minimum credit scores to qualify for auto loans vary based on the lender and the car you are looking to finance. Some lenders may consider you if your credit score is below the advertised minimum if you are a current customer or can otherwise prove to them that you are a low-risk borrower.
A credit score is a numerical representation of how likely you are to repay a loan. The higher your credit score, the less risky you are considered and the more likely you are to receive a favorable interest rate on your loan and better terms.
The FICO score is the most widely used score for auto loans. The score ranges from 300 to 850. The score is calculated based on credit mix, payment history, amount owed, average credit history and available credit.
Those with credit scores under 500 are considered to have deep subprime credit and will likely face the highest interest rates. The average auto loan interest rate for the deep subprime category was 12.93 percent. But, depending on your income and other factors, you