What Credit Score Is Needed to Buy a Car?

For many of us, buying a new car is about more than getting where we need to go. It’s also about relaxing on the open road, listening to our favorite tunes and visiting the people we love. If you're considering financing a car, maybe you've already started looking at ads and reviews, figuring out what you can afford or even going to dealerships. But is there more you should know besides features and sticker price?

How Your Credit Score Affects Your Auto Loan

If you plan to finance your new vehicle, keep in mind that the cost will include more than the price you settle on with the seller. Your interest rate and fees, plus the cost of the vehicle, will make up your total car payment. And, it’s important to understand that not every borrower qualifies for the same interest rate. The loan terms you’ll be offered depend on several things.

The #1 Factor

Whether you’re shopping for a new or used car, a big influence on your auto loan’s interest rate, and therefore your monthly payment, is your credit score. Although not all credit scores are calculated in exactly the same way, they do follow similar rules. Some of the factors that make up your score include your payment history, how much you owe, the type of credit and debt you have and how long you’ve had it.

What Is a FICO Auto Score?

A FICO®^{Footnote 1} Auto Score is a credit scoring model specifically designed to assess your creditworthiness when applying for an auto loan. It considers factors like your credit history, payment history, credit utilization and the types of credit accounts held. Lenders use this score to determine the interest rate, terms and approval of auto loan applications. A higher FICO Auto Score tells the lender you’re a lower credit risk, potentially leading to better loan terms, lower interest rates and higher chances of loan approval.

FICO

FICO Score Ratings

Rating	FICO Range
Very Poor	300-579
Fair	580-669
Good	670-739
Very Good	740-799
Exceptional	800-850

Car dealers may also use VantageScore®^{Footnote 2}, a less industry-specific model, when evaluating your auto loan application. 

VantageScore

VantageScore Ratings

Rating	VantageScore Range
Very Poor	300-499
Poor	500-600
Fair	601-660
Good	661-780
Exceptional	781-850

Source: Experian®

What does that mean for you?

It means that although different lenders use different measures, people with exceptional or at least good credit scores may qualify for lower rates, while people with lower credit scores will often qualify only for higher rates.

High Credit Score → Low Interest Rate

Average Credit Score → Medium Interest Rate

Low Credit Score → High Interest Rate

Other Factors Affecting Your Auto Loan Rate

• The size of your loan and down payment. Borrow less or make a large down payment, and you’re more likely to get a lower rate. 

• The length of the loan. Shorter term loans usually have lower interest rates. 

• The age of the car. Typically, the newer the car, the lower the interest rate. You’ll see other terms used by auto lenders like:

"super prime” for those with excellent credit

“deep subprime” or “subprime borrower” for those with very bad credit

Pro Tip: People with credit so low they can’t qualify for a used or new car loan on their own might be able to with the help of a co-signer.

Is There a Minimum Credit Score to Buy a Car?

Is there a magic number your credit score should reach to buy a car? The short answer is no, but lenders do use credit scores as guidelines to determine whether someone is assigned a higher or lower rate.

Be sure to check your credit report a few months before applying for an auto loan to ensure its accuracy. If you’re not sure where you stand, you can order a free copy of your credit report 3 to 6 months before applying for an auto loan. That way, if you need to improve your credit, you’ll have time to do it. It’s a good idea, even if you aren’t borrowing for your car purchase, because credit scores can also affect your car insurance premium. 

What if I Need a Car but Have Bad Credit?

If you don't have an established credit history, a trustworthy co-signer with a strong credit history could help you secure an auto loan—and may also get you a better interest rate. If you’re unable to arrange a co-signer—or you’re only approved for loans with a high-interest rate—consider putting off the purchase of your car until you can save for a down payment. Some lenders can be more flexible with their financing plans if you put down more money up front.

Tips for Improving Credit

Here are some simple steps to get you started. 

• Check your report for mistakes. After ordering your credit report, review the information for any mistakes that could be lowering your credit rating. Contact the reporting service to have the information corrected. 
• Pay your bills on time—always. Lenders want to know that you’ll pay back what you’ve borrowed, so showing that you can make on-time payments will help your creditworthiness. If you’ve already missed some loan payments, making consistent payments from now on (and catching up if you can) will help credit recover over time. 
• Pay off your smaller loans. Do you have any accounts with small balances? It’s best to pay those off if you have multiple accounts because credit bureaus may dock your score for having too many accounts with outstanding balances.
• Be strategic about applying for new credit, store credit cards or loans. Your credit score may be dinged if the average age of your accounts is too young, or you carry high balances. However, if you have almost no credit history, it may be wise to open a credit card now so you can start building a history of timely payments. Navy Federal Credit Union’s nRewards® Secured card earns rewards while building your credit.
• Be patient. You’ll need more than a a month or two to improve your credit. Be aware that if your credit score is low due to multiple missed payments or other personal finance issues, it can take more time to rebuild. If this is your situation, you may still qualify for an auto loan from Navy Federal. We’ll consider your relationship with our credit union as a whole, in addition to your credit score—you’re not just a number here!