Generally, a good credit score to buy a car falls within the range of 660 to 720 or higher. However, it's important to note that each lender has different criteria, and some may consider lower credit scores as well.
There is no minimum credit score required to buy a car, but most lenders have minimum requirements for financing. Most borrowers need a FICO score of at least 600 to get a competitive rate on an auto loan.
A FICO® Score of 725 provides access to a broad array of loans and credit card products, but increasing your score can increase your odds of approval for an even greater number, at more affordable lending terms.
There isn't one specific score that's required to buy a car because lenders have different standards. However, the vast majority of borrowers have scores of 661 or higher.
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.”
Payments would be around $377 per month. According to the results, it will take you 60 months, an interest rate of 5% of $2,645, to fully pay your $20,000 car loan. However, the monthly cost of a $20,000 car loan will depend on your repayment period and the annual percentage rate (APR).
Nearly half of Americans score between 750 and 850, in the very good to exceptional range, while less than 25% of Americans have a score between 300 and 649, the poor to fair credit score range.
Quick insights. A 725 credit score is considered to be a “good” credit score by the two main credit scoring models. You may be eligible for different types of credit and could potentially gain access to lower interest rates with a good credit score.
Many dealers use a FICO Auto Score instead of a traditional FICO Score or VantageScore when evaluating your car loan application. Your FICO Auto Score can range from 250 to 900, depending on your previous auto loans.
It's total loan amount (including interest) divided by the loan term (number of months you have to repay the loan. For example, the total interest for a $30,000, 60-month loan at 7% would be $6,497.40. So the monthly payment would be $608.29 ($30,000 + $6,497.40 ÷ 60 = $552.50).
However, for auto loans, lenders usually prefer a debt-to-income ratio below 36%. The minimum income necessary to qualify for an auto loan may vary, but most lenders prefer an applicant to have at least $1,500 to $2,000 in monthly income before taxes.
According to MyFICO, as of November 2022, the average APR on a 60-month new auto loan for someone with a FICO Score of 720 or higher is 5.64%. With a score in the 690-719 range, it's 6.83%. And for a borrower with a score in the 660-689 tier, the average APR is 9.19%.
If you need an auto loan to buy a car, lenders are going to run a credit check on you. Some lenders will use the industry-specific FICO auto score. You will likely need a credit score of 661 or higher to qualify for an auto loan with a good interest rate.
A 720 credit score is going to look pretty good to most credit card issuers. The top-of-the line rewards cards may be out of reach, but you'll likely be able to qualify for decent cards with rewards or cash back.
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. And having a credit score of 850 is rare. According to the credit reporting agency Experian, only about 1.3% of Americans have a perfect credit score, as of 2021.
Key Things to Know About a 725 Credit Score
Borrowing Options: Most borrowing options are available, and the terms are likely to be attractive. For example, you might be able to qualify for the best credit cards and some of the best personal loans.
The average FICO credit score in the US is 717, according to the latest FICO data. The average VantageScore is 701 as of January 2024.
However, transitioning from fair to good credit (700-749) might take a few additional years of responsible credit behavior. Reaching an excellent credit score (750 and above) is generally a long-term goal and may require at least five to ten years of consistently responsible credit habits.
How much would a $30,000 car cost per month? This all depends on the sales tax, the down payment, the interest rate and the length of the loan. But just as a ballpark estimate, assuming $3,000 down, an interest rate of 5.8% and a 60-month loan, the monthly payment would be about $520.
NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment. Check if you can really afford the payment by depositing that amount into a savings account for a few months.