What Credit Score Is Needed to Buy a Car?

When you are looking for a new car and want to take on a car loan, you need a good credit score to buy a car. Generally, a 661 credit score is accepted by most financing providers. However, some financial institutions may require a credit score as high as 755 to grant a first-time car buyer loan. But you shouldn’t feel too discouraged, as you can still buy a car even with bad credit. 

Either way, before buying a new car, you may want to maintain a minimum credit score for a car loan to get competitive rates. In this blog, we’ll talk about what credit score is needed to buy a car, how to get a car loan with bad credit, and what else you can do to improve your credit score, so read on!

What Is a Good Credit Score to Buy a Car?

There’s no specified minimum credit score needed to buy a car. However, when you have an average 660 credit score, an auto loan with a competitive rate can be much easier to obtain. However, poor credit scores can make it challenging to secure an auto loan. Credit score impacts the interest rate and various other factors in your loan application.

Here’s an example of different auto loan APRs for applicants with varied credit ranges:

Credit Score Category	VantageScore Range	Average APR (%) For a Used Car	Average APR (%) For a New Car
Excellent	781–850	7.67%	4.77%
Good	661–780	9.95%	6.40%
Fair	601–660	14.46%	9.59%
Poor	501–600	19.38%	13.08%
Very Poor	300–500	21.81%	15.75%

However, it's crucial to note that the actual APR may differ based on various other factors.

How to Improve Your Credit Score to Buy a Car?

Although all lenders may set different credit score criteria for acceptance, you have a better chance if you work on improving your credit score before buying a car.

Here are the top ways to improve your credit score:

• Always Make Timely Loan Payments

Paying loan installments on time can strengthen your payment history, which is a crucial aspect of your credit report. Even a single late payment that goes 30 days past due can cost you 100 credit points. 

• Dispute False/Incorrect Charges on Your Credit Report

If there are any mistakes or errors in your credit report, it can damage your score. If that’s the case, you need to analyze your credit report and immediately raise a dispute for the same. For this, you can send a dispute letter or use the CoolCredit app’s ready-to-use dispute letter templates.  

• Keep a Low Credit Utilization Rate

Exceeding or exhausting your credit limit can increase the credit utilization rate, which can lower your credit score and the chances of getting approved for an auto loan. Hence, it’s recommended to lower your credit utilization rate, ideally under 30%.  

•  Limit Credit Applications

Applying for loans back-to-back can lead to too many hard inquiries in a short time, so your credit score may take a hit. That’s why, when you are planning to buy a car, avoid applying for any new credit applications for at least 6 months prior. This can help stabilize your finances and maintain stable credit utilization.  

• Address Collection Accounts

It’s crucial to manage collection accounts effectively. So, if you have any accounts in collections, paying them off can help prevent legal action and potentially improve your credit score. Paying off or settling collection accounts also helps boost your creditworthiness.

• Improve Credit Scores with CoolCredit

If you want to expedite boosting your credit scores, the CoolCredit app can help in the following ways:

• Independently manage your credit-building/improvement process
• Provide essential guidance with AI-assisted credit repair tools
• Professional assistance when needed
• Helps systematically identifying and addressing negative items on your credit report

Does Getting a Car Loan Help Build Credit?

Yes, when you successfully obtain a car loan, it can help build your credit as long as you pay all installments on time without any defaults until the loan term ends. Timely payments are accounted for when credit bureaus check your payment history. Hence, even a single missed payment can impact your chances of getting loan approval.

How to Get a Car Loan with Bad Credit?

You can apply for a bad credit automobile loan from third-party lenders, though you may need to pay higher interest rates. Here are a few tips that can further help improve your chances of getting a car loan with bad credit:

Put Down a Large Down Payment	Despite having a low credit score, if you are willing to pay a larger down payment, it can help lenders consider you as a less risky applicant.
Provide Reliable Income Proof	If you previously had financial hardship, causing your credit scores to drop, and you are doing better, you can submit valid income proof like your latest pay stubs, bank statements, and other relevant financial documents as proof to seem more reliable.
Rate Shopping for a Loan	It’s best to check the car financing APRs offered by different dealerships and third-party lenders before making a decision.

Conclusion

Your credit score is a crucial indicator of creditworthiness. When you want to apply for an auto loan, credit score plays a crucial role in the approval process. So, before making a move, it's best to fetch your credit report from the credit bureaus and work on maintaining the minimum credit score for a car loan, i.e., 660 or better. You can achieve this with the AI-assisted CoolCredit app.

Find Out What Is Impacting Your Credit Scores the Most with the CoolCredit App If you want a targeted approach to achieve your credit score goals, download the CoolCredit app and analyze your credit report. It uses AI to analyze the negative items on your credit report and provides step-by-step guidance along with a range of credit repair tools to help you improve your credit.

FAQs

Q: What’s a Good Credit Score to Buy a Car? 

A: A 660+ credit score is ideal for buying a car, though there are no specified credit score requirements. 

Q: What Is a Good FICO Score to Buy a Car?

A: A FICO score of 670 or higher brings you the best chances of getting an auto loan with favorable terms to buy a car. However, it's recommended to aim for a 700 credit score to secure the best deals possible from the car dealership near you.

Q: Can I Get Auto Loans Without Credit Check?

A: Yes, but it can be tricky. Many car dealerships offer options like no-credit-check financing for buying a car, “BNPH” options (i.e., in-house financing by dealerships), or no-interest financing for a specified promotional period by a third party. It can be a viable option when you have a low or poor credit score. However, you may need to search a bit for a car dealership near you with no-credit-check options. 

Q: What Minimum Credit Score Is Needed to Get a Car Loan?

A:Though there’s no fixed credit score limit, 600 is the minimum credit score for a car loan.

Q: How Can I Improve My Credit Scores?

A: You can do various things, like paying bills on time, paying timely loan installments, and exhibiting financially responsible credit behavior. Additionally, if you need specialized assistance with step-by-step guidance, the CoolCredit app is the best choice. It uses AI to analyze your credit report and provides all the tools and resources you need to maintain and improve your credit scores.