Key takeaways. 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.
What credit score do auto lenders look at? The three major credit bureaus are Experian, TransUnion and Equifax. The two big credit scoring models used by auto lenders are FICO® Auto Score and Vantage. We're going to take at look at FICO® since it has long been the auto industry standard.
The newest version (as of this writing) is FICO® Auto Score 10, introduced in 2020. However, many auto lenders still use FICO® Auto Score 2, FICO® Auto Score 4, FICO® Auto Score 5, and FICO® Auto Score 8. Here is a list of which FICO® auto scores are most commonly used by auto lenders for each credit bureau.
Lenders request these scores when evaluating consumer credit applications. Lenders determine which credit report and credit score they want to access on you. They can pull from any or all three of the bureaus. So it's smart to know your FICO® Scores from all three bureaus.
FICO® Scores are a type of credit score, but not all credit scores are FICO® Scores. Checking your FICO® Score may be more beneficial, as 90% of top lenders use FICO® Credit Scores. There are different versions of FICO® Credit Scores finetuned for different credit products (like home and car loans).
There isn't one standard credit score required to qualify for an auto loan. Lenders look at your credit score when they review your application for a car loan, alongside other financial factors, such as your income. Your credit score is an important factor in determining your ability to repay debt.
Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.
Aside from your usual information, car dealerships will also obtain information such as any previous loan defaults or repossession, late payments, signs of bankruptcy, and history of credit repair. This information will help your dealership decide how to approach your car financing application.
FICO® and VantageScore® are the two most popular credit scoring models today. FICO and VantageScore credit scores are equally reliable and accurate, based on the specific scoring model that's being used. Tools are available that allow you to check and monitor your credit score for free, with no impact to your credit.
Good FICO Auto Scores for Auto Loan Qualification
Lenders typically prefer borrowers with a credit score of 661 or higher. In addition to qualifying you for a loan, your FICO auto score can influence the interest rates that lenders offer you. A higher credit score will usually translate into a lower interest rate.
A down payment may help you to more easily qualify for an auto loan, especially if you have lower credit scores. Without a down payment, the lender has more to lose if you don't repay the loan and they need to repossess and sell the car. Cars can begin losing value as soon as you drive off the lot.
You can work directly with a bank or credit union, get dealership-arranged financing, or go through a “no credit check” or “buy here, pay here” dealership that finances the loan in-house.
However, many people don't know what credit score car dealers actually use. Unlike your traditional FICO score, car dealers — more accurately lending institutions that sell auto loans to dealerships — refer to another, less known score, called The FICO® 8 Auto Score, or its competitor CreditVision.
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.”
The main categories considered are a person's payment history (35%), amounts owed (30%), length of credit history (15%), new credit accounts (10%), and types of credit used (10%).
If you have pre-approved financing before you visit any dealerships, you don't need to tell the salesperson about it immediately. As with the all-cash scenario, as soon as they know they're not going to make any money on the car's financing, their price for the vehicle will either be non-negotiable or even go up.
A dealership checking your credit score is a soft inquiry and won't affect your credit. Any hard credit check triggered by a loan application will appear on your credit report, shaving points from your credit score.
Is 550 a Good Credit Score to Buy a Car? When you have bad credit – say, a credit score around 550 – getting approved for a car loan can be difficult. While you should try for a pre-approval with your bank or credit union, you more than likely are going to need a subprime lender.
Your FICO® scores are just one type of credit score that lenders or creditors may use when determining whether they'll provide you a loan or credit card. While FICO® scores are commonly used by lenders to assess your credit risk, other credit scores can also give you a good idea of where you stand.
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.
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.
While not always required, your recent bank statements can help the dealership both verify your current residency and income. You might use them to show newer or less common income sources that aren't reported on pay stubs or your last tax documents.
A basic FICO score measures how reliable you are at paying back debts. An auto loan FICO score specifically measures your ability to pay back auto loans. The basic FICO and auto loan FICO scores use different credit scoring models. The base FICO score ranges from 300 to 850, but FICO auto scores range from 250 to 900.