Person driving in their car as the sun sets

​​What’s the Minimum Credit Score for a Car Loan?

So you’re looking to buy a car? Congratulations!. But, you’re wondering if you’ll get approved based on your credit score? 

Upfront, we’re going to let you in on a secret, there actually isn’t a universal minimum credit score required for a car loan. But, your credit score can affect your loan terms and ability to get approved. 

Want to know more? Keep reading because we’re about to break it all down. 

What is a Good Credit Score For a Car Loan? 

Like we said, there is no universal minimum credit score required to get a car loan, but your credit score will impact the terms of your auto loan. 

Car dealers quite literally need to sell cars. It’s their job. So, even if your credit score is in the deep subprime range (300-500) you can get a car loan. You might need a co-signer, have long payment terms, and be charged a high interest rate, but you can probably get a loan. 

Most auto lenders prefer that your credit score be 450 or higher when reviewing car loan applications. So, while there isn’t some mandated standard, let’s call 450 the minimum credit score to buy a car. 

How Does Your Credit Score Affect Your Car Loan?

The reason your credit score matters when you’re applying for a car loan (whether you want a new or used car) is because it impacts your loan terms like how long you have to pay it back, what your monthly payment is, if you have to get a co-signer, and what your interest rate is. Check it out.

Average Car Loan Interest Rate by Credit Score

There’s a big difference in those interest rates if you have bad or poor credit (deep subprime), compared to average credit (sub-prime to non prime), compared to excellent credit (prime to super prime). 

Still not convinced? Two people, one with a subprime credit score and one with a prime credit score both want to get a loan for a $10,000 used car. Both of them get a 60 month loan term. The prime borrower is offered a 6.05% interest rate. The subprime borrower? A 17.78% interest rate. 

Over the 60 months, the subprime borrower is going to pay $5,164 in interest or $15,164 total for the car. The prime borrower will pay $1,614 in interest or $11,614 total for the car.. That’s a $3,550 difference in interest paid all because of their credit score. 

We all want to be the prime borrower in this situation. But, if you’re not and you know your credit score could use some work, then you know the drill, keep reading. 

How Can You Improve Your Credit?

#1. Check Your Credit Report to Find Out Your Credit Score 

Knowledge is power. Now that you know a bit more about the credit score you need to get a favorable card loan so that you can get a good auto loan interest rate, keep the learning going. Log into your bank or a tool like Credit Karma and check your credit score. Maybe it’s not as bad as you think! 

Of course, unless you have an 850, there’s always room for improvement. But, in order to know what steps you need to take, you need to know what you’re working with. Checking your credit report to find out your credit score is an important first step.

#2. Make Your Payments On Time 

If your credit score has taken some hits, it might be because you missed a few payments here or there and those payments have negatively impacted your payment history which is a really important factor in your credit score. 

Whether it’s a student loan or a credit card, you want to make sure that you’re doing your best to pay your debts back on time. That doesn’t mean that you have to pay them off all at once. If you can only afford the minimum payment, pay that. But try not to be late or skip payments all together because doing so is really bad for your credit score. 

#3. Use EXTRA 

We’re the first debit card that helps you build credit!¹ How? 

When you use EXTRA for everyday purchases, we spot you for your purchases and then pay ourselves back the next business day. At the end of the month, we report those same purchases to the credit bureaus as credit worthy payments which boosts your credit score. There’s no credit check required to get an EXTRA debit card and we connect to sync right up with your bank.² We make it easy to build credit so you can have a credit score that you’re proud of.¹ 

new car

#4. Hold Off on Applying for New Lines of Credit

When you apply for a line of credit, something called an inquiry gets put on your credit report. Too many of those in a short amount of time shows lenders that you’re probably living beyond your means which makes them not want to loan you money. After all, they want to make sure they’re going to get the money they give you back. 

When you know you have a big purchase like a car or house coming up, don’t apply for any new lines of credit for at least 6 months before when you hope to make the purchase. Not only will this help your credit score stay stable, but it will put potential lenders at ease. 

#5. Don’t Use All The Credit Available To You

Another way to build your credit score is actually to use less of the credit available to you. So, maxing out your credit cards is a big no-no. You want to keep your credit usage or credit utilization to around 30%. 

So if your credit card has a credit limit of $1000, try not to carry a balance higher than $300 on that card at any point. Ideally, you’d pay your credit card off in full every month, but if that’s just not realistic, do your best to keep your credit utilization in mind. 

#6. Add A Little Bit Of Spice

Mix up the types of credit that you have. Don’t borrow money just to borrow money, but having a variety of credit lines (that are in good standing) demonstrates to lenders that you can handle the responsibility of being loaned money. So try to have a mix of credit types like personal loans, student loans, home loans, or credit cards. Maybe not all of them, but you know, two or three. 

It’s possible to get a car loan even with a low credit score. So don’t be discouraged or afraid to shop around. But, make sure you also keep working on building your credit your credit score by using EXTRA.¹ 

Soon, you’ll be driving off the lot with the car of your dreams in no time. 

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