When it comes to buying a car, there is no set credit score you need to qualify for an auto loan. While having a higher score may improve your chances of getting a loan with lower rates and more favorable terms, it is still possible to get an auto loan with a score that isn't perfect. Generally, lenders look for borrowers in the preferred range or higher, so you'll need a score of 661 or higher to qualify for most conventional auto loans. If your score is in the range of non-prime to deep subprime, you might consider applying for an auto loan with a co-signer. A co-signer shares responsibility for the loan, reducing the lender's risk.
You're more likely to qualify for a loan and get a lower interest rate than if you applied for it on your own. However, if you can't make loan payments, your co-signer will keep the bill. Credit rating requirements vary greatly by lender, so there's no national minimum credit score you'll need to get an auto loan. Nearly 54% of used car loans are issued to preferred borrowers, who have good credit, or high-risk borrowers, who have near-perfect credit. Those borrowers will get a better interest rate than those with a lower credit score.
High-risk borrowers often pay more than three times the interest rate that a high-risk borrower pays. For lenders, your credit score is an important indicator of your ability to repay borrowed money on time, such as car loans. For borrowers who can't meet other lenders' minimum credit rating requirements, high-risk lenders fill the gap. VantageScore 3.0 and 4.0 are credit rating models created in collaboration with Experian, Equifax and TransUnion. If your credit score falls below this threshold, you may struggle to qualify for an auto loan with a traditional lender. The red flags on your credit will be highlighted, so be prepared to explain any imperfections, such as a collection account or several late credit card payments.
Look for lenders who finance vehicles for people with credit scores similar to yours, and also see what financing the dealer can offer. In conclusion, there is no set credit score you need to get an auto loan. If you have a credit score greater than 660, you are likely to qualify for an auto loan with an APR of less than 10%. If you have bad credit or no credit, you could still qualify for an auto loan but should expect to pay more. Having a higher score may improve your chances of getting a loan with lower rates and more favorable terms.
