The credit score you need depends on the type of loan and the lender

There is no single credit score that makes you able to buy a car. Different lenders set different minimums, and the score matters less than you might think — your down payment, income, and whether you have a co-signer often matter more. A score of 620 or higher opens doors at most traditional lenders, but you can get a car loan with a score below 600 if you have a larger down payment or a co-signer with better credit. Subprime lenders (those who specialize in lower scores) may approve you at 500 or below, though the interest rate will be much higher.

The type of lender you approach changes what score they care about. Banks typically want 700 or higher. Credit unions often go lower — many will work with scores in the 600 range. Dealership financing (where the dealer arranges the loan) can approve scores as low as 550, but the cost is steep. Online lenders and buy-here-pay-here dealers (who finance and sell used cars directly) have the lowest score requirements but charge the highest interest rates.

Key Takeaways

  • A score of 620 or higher works at most traditional lenders, but credit unions and dealerships may approve lower scores.
  • Your down payment and co-signer matter as much as your score — a larger down payment can offset a lower score.
  • Interest rates rise sharply as your score drops, so a 550 score might cost you thousands more in interest over the life of the loan.
  • Checking your credit report before you shop can reveal errors that are dragging your score down and may be fixable before you apply.

How lenders use your credit score when you apply for a car loan

When you apply for a car loan, the lender pulls your credit report and score to decide two things: whether to lend to you at all, and what interest rate to charge. The score is one input among several. A lender will also look at your debt-to-income ratio (how much you owe compared to what you earn), your employment history, and whether you have made on-time payments in the past. A high score with unstable income may not get you approved. A lower score with steady employment and a large down payment often will.

The interest rate is where your score has the biggest impact on your wallet. A borrower with a 750 score might get a 4% interest rate on a $25,000 loan, while a borrower with a 620 score on the same loan might pay 9% or higher. Over five years, that difference adds up to thousands of dollars in extra payments. This is why checking your score before you shop and fixing any errors on your report can save real money.

What happens if your score is below 620

A score below 620 does not mean you cannot buy a car. It means your options narrow and your costs rise. Dealership financing and buy-here-pay-here dealers will work with you, but interest rates will be significantly higher — sometimes 15% to 29% depending on how low your score is and what vehicle you are buying. You will also likely need a larger down payment (often 15% to 25% of the car's price instead of 10% or less).

A co-signer with better credit can change the equation. If someone with a score of 700 or higher co-signs your loan, many lenders will approve you at a much lower rate, even if your own score is 550. The co-signer is legally responsible for the loan if you do not pay, so choose someone who understands that risk. Credit unions are often more flexible with lower scores than banks, so calling a few credit unions in your area before you visit a dealership can give you a clearer picture of what rate you might actually get.

How to check your score before you shop for a car

You can see your credit score for free through several routes. AnnualCreditReport.com (the official site run by the three major credit bureaus) gives you a free credit report once per year from each bureau — Equifax, Experian, and TransUnion. The report itself does not include your score, but it shows all the accounts and payment history that make up your score. Many credit card companies and banks also show your score for free in your online account. Credit Karma and other free score sites give you a score instantly, though the exact number may differ slightly from what a lender sees.

Before you apply for a car loan, pull your report and look for errors: accounts you do not recognize, late payments that were actually on time, or accounts listed twice. Errors are common and can drag your score down by 50 to 100 points. You can dispute errors for free by contacting the bureau directly through AnnualCreditReport.com. If the error is fixed before you apply for the loan, your score may jump enough to move you into a better interest rate bracket.

The difference between hard and soft credit inquiries when car shopping

When you apply for a car loan, the lender does a hard inquiry (also called a hard pull), which appears on your credit report and lowers your score by a few points — usually 5 to 10 points per inquiry. Multiple hard inquiries in a short time (within 14 to 45 days, depending on the scoring model) count as a single inquiry for scoring purposes, so shopping around at several lenders in one week does not hurt as much as it sounds. However, if you space applications out over months, each one hits your score separately.

Before you visit a dealership or apply anywhere, you can check your own score through the free methods above — that is a soft inquiry and does not affect your score at all. Dealerships sometimes offer to "check what rate you can get" without a formal application; that is usually a soft inquiry too. Ask before they pull your credit whether it will be a hard or soft inquiry. If you are serious about buying, the hard inquiries are worth it because the score impact is temporary and the rate savings can be substantial.

Interest rates and total cost at different credit score ranges

The relationship between score and interest rate is not linear — the biggest jumps happen at the lower end of the scale. A borrower moving from 580 to 620 might see a 3 to 4 percentage point drop in interest rate. A borrower moving from 720 to 760 might see only a 0.5 percentage point drop. This means that if your score is below 620, even a small improvement can save you hundreds or thousands of dollars.

On a $20,000 car loan over 60 months, the difference between a 6% rate and a 12% rate is roughly $3,000 in extra interest paid. On a $30,000 loan, it is closer to $4,500. These numbers are why some people with lower scores choose to delay buying, work on raising their score for a few months, and then apply. Paying down existing debt, making all payments on time, and disputing errors on your report can raise your score 30 to 100 points in a few months, which often translates to a lower interest rate when you do apply.

Alternatives if you cannot get approved at a traditional lender

If banks and credit unions turn you down, you have other routes. Buy-here-pay-here dealers finance cars directly and typically approve anyone with a down payment, regardless of credit score. The trade-off is a much higher interest rate (often 18% to 29%) and weekly or bi-weekly payments instead of monthly ones. These dealers also often install GPS trackers and starter interrupt devices (which disable the car if you miss a payment), so read the contract carefully.

Credit-builder car loans are another option at some credit unions and online lenders. You make payments into a savings account, and once you have paid enough, the lender releases the funds and you own the car outright. This route takes longer and requires discipline, but it builds your credit without the high interest rates of subprime lending. Some nonprofits and community organizations also offer car-buying programs for people with low income or poor credit; search "[your city] car buying assistance" to see what exists locally.

Frequently Asked Questions

Can I buy a car with no credit history?

Yes, but you will likely need a larger down payment (20% to 30%) or a co-signer. Lenders have no history to judge you on, so they want more security. A credit union or dealership is more likely to work with you than a bank. Making your first car loan on time will build your credit for future purchases.

Does shopping around for car loans hurt my credit score?

Multiple inquiries within 14 to 45 days count as one inquiry for scoring purposes, so shopping around in a short window causes minimal damage — usually 5 to 10 points total. Spacing applications out over months means each one hits separately, so do your shopping quickly if you plan to apply to multiple lenders.

What if I have a high score but was just denied for a car loan?

Credit score is only one factor. Lenders also look at income, employment history, and debt-to-income ratio. You may have been denied because your income is too low relative to the loan amount, you changed jobs recently, or you already carry too much debt. Ask the lender what reason they gave and whether a co-signer or larger down payment would change the decision.

Will paying off debt before I buy a car improve my score enough to matter?

Paying down debt lowers your credit utilization (the percentage of available credit you are using), which can raise your score 10 to 50 points or more depending on how much you pay down. This usually takes a few weeks to appear on your report. Paying off debt also improves your debt-to-income ratio, which lenders look at separately from your score.

Is it better to get pre-approved or to shop at the dealership?

Getting pre-approved at a bank or credit union before you visit a dealership tells you what rate you actually may have access to for, which gives you negotiating power. Dealership financing is convenient but often more expensive. Pre-approval also means you know your budget before you start shopping, which prevents overspending.