Yes, it's possible to finance a vehicle purchase with a 500 credit score or even below that. Keep in mind, though, that you can generally expect limited options, as well as high interest rates and fees. If possible, try to improve your credit before applying.
Borrowers with scores of 501 to 600 account for more than 12.29% of cars financed, while people with scores of 500 or below account for less than 2%, according to Experian. A lower credit score won't necessarily keep you from securing a car loan, but it might spike your interest rate, leading to higher payments.
According to Car and Driver, “Most used auto loans go to borrowers with minimum credit scores of at least 675. For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments.”
Reputable lenders who offer emergency loans for 500 credit score borrowers include Avant, LendingPoint, and OneMain Financial. However, many online lenders offer guaranteed loan approval for bad credit borrowers at higher interest rates.
You may be able to get a personal loan without income verification if you pledge collateral, use a co-signer or have an excellent credit score. There are several ways to get approved for a personal loan with no proof of income, including applying with a co-signer and securing the loan with collateral.
Your good credit handling behaviour translates to credit scores exceeding 650 points. On the other hand, if you have been struggling to pay of your debt, your score may be lower than 650 points. A low score makes lenders think that you are a risky borrower, which impacts your chances of procuring a loan.
In general, you'll need a FICO credit score of at least 600 to qualify for a traditional auto loan, although there are lenders that offer bad credit auto loans.
What is the highest credit score possible? To start off: No, it's not possible to have a 900 credit score in the United States. In some countries that use other models, like Canada, people could have a score of 900. The current scoring models in the U.S. have a maximum of 850.
If you want to take out an auto loan with bad credit or no credit, the majority of subprime lenders will require a down payment of 10% or $1,000, whichever is greater. While this is the minimum, you can always put a larger down payment, which helps since you have to pay a lower monthly payment for the rest of the loan.
Automakers such as Ford, Kia, and Hyundai are known for working with borrowers who have lower credit scores. In addition, CarsDirect has a network of dealers that specialize in bad credit car loans whether you're considering a new or used car.
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
Best rates for new-car loans: Bank of America and PenFed Credit Union. Loans for new cars typically have lower interest rates than used-car loans, so you may already be on track to score a better auto loan rate. Among all of the lenders we reviewed, Bank of America and PenFed Credit Union are our top choices.
Buying a Car After a Repossession Is Possible
Paying cash, saving up a large down payment, choosing an inexpensive used car, getting a cosigner, or using dealer financing can help you get back behind the wheel.
Even better, just over 1 in 5 people (21.2%) have an exceptional FICO credit score of 800 or above, all but guaranteeing access to the best products and interest rates.
And when it comes to credit, 850 is the highest the FICO® Score☉ scale goes. For more and more U.S. consumers, practice is making perfect. According to recent Experian data, 1.54% of consumers have a "perfect" FICO® Score of 850. That's up from 1.31% two years earlier.
Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian. Meanwhile, low-credit borrowers with scores of 600 or lower accounted for only 14% of auto loans.
Rates and terms are subject to change without notice. Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
Every lender sets its own requirements for zero-down-payment deals, if they offer them at all. Generally, the credit score needed to buy a car is at least 661 whether you make a down payment or not. You could still get a car loan if your score is lower than 661, but be prepared to pay higher interest rates.
How Long Does It Take to Fix Credit? The good news is that when your score is low, each positive change you make is likely to have a significant impact. For instance, going from a poor credit score of around 500 to a fair credit score (in the 580-669 range) takes around 12 to 18 months of responsible credit use.
Improving a 500 credit score typically takes several months, but it depends on your specific financial situation. If you follow key strategies like paying down debt, disputing errors, and building positive credit history, you could see improvements within 3-6 months.
In addition to regular loans, many credit unions offer payday alternative loans (PALs) for amounts up to $2,000. These are an especially good option if you have fair or bad credit as rates are capped at 28%, and they're designed for borrowers who struggle to be approved for credit.