A car is an expensive purchase that often requires financing. Nearly 80% of new car buyers took out a loan or a lease in 2023, according to Experian, as did almost 38% of used car buyers.
Your credit history significantly impacts whether you’ll get approved for a loan and what your rate you’ll be offered. But lenders calculate credit scores for auto loans differently than they do for a credit card, mortgage or personal loan or other forms of debt.
Knowing how your score is determined and what score to aim for can help make the process less painful and confusing.
Credit scores for car loans
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How your credit score impacts car loans
There are two types credit-scoring models that lenders often use to evaluate borrowers: the FICO® Score and the VantageScore®.
When it comes to car buying, a number of lenders use the FICO Score 8 and 9 or VantageScore 3.0. However, there is also an industry-specific score that many lenders use, known as the FICO Auto Score. Auto Scores range from 250 to 900 (compared to 300 to 850 for the base FICO score).
Industry-specific scores are optimized for certain types of credit products, so the Auto Score factors your past history with car payments, for example.
If you are getting ready to apply for a car loan, you should ask the lender what credit scoring system they use.
You can check your FICO Auto Score using MyFICO, which has both a free option and paid tiers with more features, like specific scores for mortgages and auto loans and $1 million identity theft insurance.
FICO® Basic, Advanced and Premier
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Cost
$29.95 to $39.95 per month
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Credit bureaus monitored
Experian for Basic plan or Experian, Equifax and TransUnion for Advanced and Premier plans
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Credit scoring model used
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Dark web scan
Yes, for Advanced and Premier plans
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Identity insurance
There are other free online resources to get your credit scores. They’re less focused on auto financing, but can give you a baseline for understanding what interest rate you may qualify for.
What credit score do I need for a car loan?
There is no magic number that will guarantee you get approved for a loan, but in the auto finance market, borrowers are grouped into different ranges. Experian uses five categories:
- Super prime: 781 to 850
- Prime: 661 to 780
- Nonprime: 601 to 660
- Subprime: 501 to 600
- Deep subprime: 300 to 500
In the second quarter of 2024, about 80% of buyers fell into the prime or super prime range, according to Experian. The average credit score for new vehicle buyers was 753 and for used car buyers it was 689.
| Credit score range | Average APR for new car | Average APR for used car |
|---|---|---|
| Super prime (781-850) | 5.25% | 7.31% |
| Prime (661-780) | 6.87% | 9.36% |
| Nonprime (601-660) | 9.83% | 13.92% |
| Subprime (501-600) | 13.18% | 18.86% |
| Deep subprime (300-500) | 15.77% | 21.55% |
Source: Experian
This is a steady increases since 2019, when the average scores were just 737 for a new car and 655 for a used one.
Using September 2024 data in the myFICO loan calculator, we can see that someone with a score of between 720 and 850 who takes out a $40,000 loan over 60 months would get an average APR of 7.45% That works out to a payment of $801 per month, with $8,034 in interest over the life of the loan.
| Credit score range | Average APR | Monthly payment | Total interest paid |
| 720-850 | 7.45% | $801 | $8,034 |
| 690-719 | 8.612% | $823 | $9,369 |
| 660-689 | 10.406% | $858 | $11,474 |
| 620-659 | 12.528 % | $900 | $14,029 |
| 590-619 | 16.891% | $992 | $19,506 |
| 500-589 | 17.77% | $1,011 | $20,650 |
Source: MyFICO
A borrower with a score between 500 to 589, however, would be hit with an average APR of 17.774 % and pay $1,011 per month, with $20,650 in total interest. If you worked to raise your credit score to between 590 and 619 before applying, you could save approximately $1,140 over the life of your loan.
How to get a car loan with bad credit
You can still get an auto loan with bad credit, but it might be harder to get approved and your rate will probably be higher — especially if you fall into the subprime or deep subprime range.
If you have bad credit, here are some tips for getting approved:
Shop around
Compare the rates between different lenders to see which can offer you the lowest rate and best terms. Don’t forget to account for administrative or origination fees, which can vary by lender.
Capital One Auto Finance is a good choice if you have less-than-stellar credit, with competitive rates and an Auto Navigator tool that lets you shop for cars and prequalify without a hard pull on your credit.
Capital One Auto Finance
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Annual Percentage Rate (APR)
Depends on credit profile
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Loan purpose
New vehicles, used vehicles, refinancing
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Loan amounts
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Terms
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Credit needed
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Early payoff penalty
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Late fee
Look for subprime or second-chance car loans
If you are not having success getting traditional financing through a dealer or a bank, you can try a subprime lender that specializes in financing for buyers with spotty credit.
“Buy here, pay here” lots offer second-chance car loans — or you can try an online marketplace like Autopay, to shop for subprime car loans. In either case, your rate and fees will likely be significantly higher since these loans are considered riskier by lenders.
Autopay Car Loan
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Annual Percentage Rate (APR)
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Loan purpose
Used and new vehicles, refinancing loans, lease buyout
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Loan amounts
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Terms
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Credit needed
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Early payoff penalty
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Late fee
Get a co-signer
A co-signer agrees to be legally responsible for the debt if the primary borrower fails to make payments. If your co-signer has a good credit score, it can make it easier to get approved for a loan with a lower interest rate.
Keep in mind that not all lenders accept co-signers, so you may need to shop around to find one. And make sure your co-signer understands the obligation they’re agreeing to.
How to improve your credit score
If your credit score is not high enough to get a good interest rate on an auto loan, there are ways to improve it.
Pay your bills on time
Your payment history is extremely important to your credit score, as it makes up 35% of FICO’s overall calculation. Every on-time payment helps improve your credit score, especially if you are paying a balance in full.
Keep your credit utilization down
Your credit utilization rate, or the amount of available credit you’re using, makes up 30% of your FICO score. If you’re using $5,000 of your $10,000 credit limit you have a 50% credit utilization ratio. Lenders typically want to see a rate of 30% or less on revolving credit accounts.
Keep your oldest credit card open
The age of your credit history makes up 15% of your FICO score. Keeping your oldest cards open increases the average age of your accounts and helps raise credit score. At the same time, try to avoid opening new accounts, which can lower the average age of your accounts and lower your score.
Be an authorized user on someone’s account
If you have a family member or friend with good credit and who is willing to add you to one of their credit card accounts as an authorized user, it can help you build credit or boost your existing score. When you become an authorized user, the credit card account is added to your credit report. So if the primary cardholder has a solid history of responsible card usage, this will positively impact your credit score.
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FAQs
What is a good credit score for a car loan?
In the first quarter of 2024, the average credit score for new vehicle buyers was 755 and for used car buyers it was 686. A credit score of at least 661, however, should qualify you for a traditional car loan at a lower interest rate.
Is it hard to get approved for a car loan?
If you have a credit score that ranks in the prime or higher category, you’ll have a much easier time getting approved for a car loan with a lower interest rate. No credit or a bad credit score will make approval much more difficult.
Can I get a car with a 500 credit score?
It’s definitely possible to get approved for financing with a 500 score, but you’ll likely get a higher interest rate. Coming in with a larger down payment can help, as will having a co-signer.
How long does it take to raise your credit score?
The length of time it takes to improve your credit score depends on your financial situation. However, you may start to see improvement within 30 to 45 days after implementing positive changes, such as paying down debt or becoming an authorized user on someone else’s account.
Will a car loan improve my credit score?
Applying for and taking out the loan can negatively impact your credit, but making consistent on-time payments will improve your credit score. That’s especially true if the loan adds to your credit mix and the length of your credit history.
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