The credit score you need depends on the lender and the type of loan
There is no single minimum credit score required to buy a car. Different lenders set different thresholds, and the score that matters varies by whether you are financing through a bank, credit union, or the dealership itself. A score of 620 or higher opens doors at most traditional lenders, but you can get a car loan with a lower score — you will simply pay more in interest. A score of 750 or above typically qualifies you for the best rates.
The reason scores vary so much is that lenders use credit scores as one piece of information, not the only piece. Your income, employment history, down payment size, and the age of the car you are buying all affect whether a lender will say yes and what rate they will offer. A person with a 580 score and a large down payment might get approved where someone with a 650 score and no down payment gets turned down.
Key Takeaways
- Most banks and credit unions require a credit score of 620 or higher, but dealership financing often works with scores as low as 500.
- Your interest rate drops significantly as your score rises — the difference between a 620 score and a 750 score can mean thousands of dollars over the life of the loan.
- A larger down payment can offset a lower credit score and may get you approved when you would otherwise be turned down.
- Checking your own credit score does not hurt it, but multiple hard inquiries from lenders within a short time can lower your score slightly.
What different lenders typically require
Banks usually want a score of 620 to 650 at minimum. Some banks have higher floors — 680 or 700 — especially for new car loans. If your score is below their minimum, they will decline you outright rather than offer a higher rate.
Credit unions tend to be more flexible than banks and may work with scores in the 580 to 620 range, particularly if you have been a member for a while. Credit unions also tend to offer lower rates than banks at the same credit score level.
Dealership financing (where the dealer arranges the loan through a captive finance company or a network of lenders) often works with scores as low as 500. Dealerships make money by placing loans, so they have incentive to find a lender willing to take on lower-score borrowers. The trade-off is that rates are usually much higher — sometimes 8 to 12 percent or more, compared to 4 to 6 percent at a bank for a strong score.
Buy-here-pay-here dealerships (dealers who finance the cars themselves) typically do not check credit scores at all. They focus on whether you can make weekly or bi-weekly payments. Interest rates are very high — often 18 to 29 percent — and the dealer keeps the title until the car is paid off.
How your credit score affects your interest rate
The relationship between credit score and interest rate is not linear. A jump from 580 to 620 might lower your rate by 1 to 2 percentage points. A jump from 700 to 750 might lower it by only 0.5 percentage points. The biggest gains come from moving out of the subprime range (below 620) into the prime range (620 and above).
To see the real impact, consider a $25,000 car loan over 60 months. At a 620 credit score, you might pay 9 percent interest, which costs about $5,900 in total interest. At a 750 score, you might pay 4.5 percent, which costs about $2,900 in total interest. That is a difference of $3,000 on a single car purchase.
Rates also vary by the age of the car. A new car loan at a 620 score might be 9 percent, while a used car loan at the same score might be 11 percent. Lenders charge more for used cars because they depreciate faster and are harder to repossess and resell if you default.
How a down payment can help if your score is low
A down payment reduces the amount you need to borrow, which lowers the lender's risk. If you have a low credit score, putting down 10 to 20 percent instead of 3 to 5 percent can be the difference between approval and rejection. Some lenders will also offer a slightly lower rate if your down payment is large enough.
Down payment size matters most at banks and credit unions. Dealership lenders are less sensitive to down payment because they are already taking on higher-risk borrowers. If you are buying from a buy-here-pay-here dealer, down payment is usually required but does not affect the interest rate — it is simply the cost of doing business with them.
What happens when you shop for a car loan
When you apply for a car loan, the lender pulls your credit report and calculates your credit score. This is called a hard inquiry and it lowers your score by a few points — usually 5 to 10 points per inquiry. The good news is that multiple hard inquiries from different lenders within 14 to 45 days (depending on the scoring model) count as a single inquiry for scoring purposes. This means you can shop around without being penalized multiple times.
Before you go to a dealership or lender, you can check your own credit score for free through your bank, credit card issuer, or a free service like Credit Karma or AnnualCreditReport.com. Checking your own score is a soft inquiry and does not lower your score at all.
Once you are approved, the lender will verify your income and employment, pull your credit report one more time, and confirm the details of the car (year, make, model, VIN). If anything has changed since your initial application — a missed payment, a new debt, a job loss — the lender can back out or change the terms.
Options if your score is too low for traditional financing
If you are turned down by banks and credit unions, dealership financing is your next step. Rates will be higher, but you will likely be approved. Before you sign, read the contract carefully and make sure you understand the total cost of the loan, not just the monthly payment.
If dealership financing is also out of reach or the rates are unaffordable, consider waiting a few months to improve your score. Paying down existing debt, making all payments on time, and correcting errors on your credit report can raise your score by 50 to 100 points in a few months. A higher score will open better loan options and save you thousands in interest.
Another option is to find a co-signer — someone with a higher credit score who agrees to be responsible for the loan if you do not pay. A co-signer can help you get approved and may lower your interest rate. The risk is that if you miss a payment, the co-signer's credit is damaged too, and they can be sued for the full amount owed.
Frequently Asked Questions
Can I get a car loan with a credit score below 600?
Yes. Dealership financing and buy-here-pay-here dealers work with scores in the 500 to 600 range. Interest rates will be high — often 10 to 15 percent or more — but you can still get a car. Banks and credit unions are unlikely to approve you at this score level.
Does the type of car I buy affect what credit score I need?
Yes. A new car loan is easier to get than a used car loan at the same credit score, because new cars hold their value better and are easier for the lender to repossess and resell. Luxury or sports cars may have higher score requirements than economy cars, depending on the lender.
Will my credit score recover after I get a car loan?
Yes, over time. Making on-time payments on your car loan will gradually raise your score. After 12 to 24 months of perfect payments, you should see a noticeable improvement. The hard inquiry from the loan application will stop affecting your score after about a year.
What if I have no credit history at all?
No credit history is different from a low credit score. Lenders have no data to assess your risk, so they may decline you or require a co-signer or a very large down payment. Building credit with a secured credit card or becoming an authorized user on someone else's account can help you establish a history before you apply for a car loan.
Can I refinance my car loan if my credit score improves?
Yes. If your score improves significantly after you buy the car, you can refinance the loan with a different lender at a lower rate. This works best if you have made at least 6 to 12 months of on-time payments and your score has risen by 50 points or more. Refinancing involves another hard inquiry and new fees, so calculate whether the interest savings are worth the cost.