What Is The Lowest Credit Score For a Car Loan?

There is no universal or official minimum credit score requirement to qualify for a car loan. In fact, the "subprime" auto loan market exists for financing consumers with bad credit. Most of those with a bad credit score will find a lender that will offer them a loan for a vehicle. Yet, those with bad credit should expect that any loan they qualify for will have high interest rates. Your credit score is not the only factor that subprime lenders consider. Other factors that apply include your employment status, income, and available down payment.

Can I Get a Car Loan With a Credit Score of 500?

Consumers with a 500-credit score will usually find someone willing to offer them a car loan. Yet, these loans will have high-interest rates. One reason that those with bad credit can get car loans is that they represent a secured loan. The vehicle's value serves as security for the lender (collateral). If the borrower fails to make the loan payments, the lender can repossess the car to offset losses. According to Experian, roughly 16% of borrowers with an auto loan have a credit score below 600. The car loans offered to those with a 500 to 600 credit score are often classified as subprime. Loans offered to those with a sub-500 credit score are often deemed as "deep" subprime.

What FICO Score Do Car Dealers Use?

Car dealers may use FICO scores based on calculations using various scoring models. To add further complication, the score generated may differ between credit reporting bureaus. Equifax, Experian, and TransUnion generate your credit history report. But not all lenders submit (report) their account activity to all three. This is why differences exist based on the bureau that is reporting. According to FICO, the versions used in auto lending include: • Experian: FICO Auto Score 2, 8, or 9 • Equifax: FICO Auto Score 5, 8, or 9 • TransUnion: FICO Auto Score 4, 8, or 9 In 2020, FICO introduced a new FICO Auto Score 10.

What is a Good Credit Score to Buy a Car?

In auto financing, no defined or exact minimum score qualifies as "good." Equifax categorizes a good credit score from 670 to 739.LendingTree suggests those with a 660 score will qualify for most loans. Yet, a score of 760 is often necessary for "special" auto manufacturer rates and rebates.

How to Get a Car Loan With Bad Credit

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Consumers with bad credit typically face some challenges when seeking a car loan. These applicants usually have fewer loan options and pay high interest rates.

Being prepared and thoroughly exploring your options is important in this process. Having proper documentation and cash upfront for a down payment are two of the most critical.

Steps to Take Before Applying for a Car Loan

Consider the following best practices in