The score lenders use to decide whether to lend you money for a car
Most car lenders will work with you if your credit score is 620 or above, though the interest rate you pay rises sharply as your score drops. A score of 660 to 680 is where you start to see rates that don't cost you thousands in extra interest. Above 740, you're in the range where lenders compete for your business and offer their best terms.
The exact score a lender will accept depends on the lender, the car, and how much money you're putting down. A credit union might lend to someone with a 580 score if they have a co-signer or a larger down payment. A bank's auto finance arm might require 650. Subprime lenders (who specialise in lower scores) will lend at 500 or below, but the interest rate can reach 18 to 20 percent or higher.
Your score is not the only thing lenders look at. They also check your income, how much you still owe on other debts, your employment history, and whether you've missed payments recently. A score of 700 with a missed payment from last month will get you a worse rate than a score of 680 with no recent misses.
Key Takeaways
- Lenders typically begin offering car loans at a credit score of 620, but rates are much higher than for borrowers with scores above 660.
- A score between 660 and 740 is where you move from expensive borrowing to competitive rates that most people can afford.
- Credit unions and community banks often lend to lower scores than national banks, and may offer better terms if you have a relationship with them.
- Your score is only one factor — lenders also weigh your income, existing debts, and recent payment history when deciding your rate.
- Putting down a larger down payment can help you get a loan or a better rate even if your score is below 660.
How your score affects the interest rate you'll pay
The difference between a 620 score and a 740 score can be 5 to 10 percentage points in interest rate. On a $25,000 car loan over 60 months, that difference means paying $3,000 to $6,000 more in interest alone.
A borrower with a 620 score might pay 12 to 15 percent. Someone with a 680 score might pay 8 to 10 percent. A 740 score could bring you down to 4 to 6 percent. These ranges vary by lender and by the time you're shopping — rates change with the market and with each lender's risk appetite.
The rate also depends on the loan term. A 36-month loan will have a lower rate than a 72-month loan for the same borrower, because the lender has less time to wait for their money back. Longer terms look riskier, so lenders charge more.
Where to look if your score is below 620
Credit unions are often the first place to check. They typically lend to lower scores than banks and may offer rates 2 to 4 percentage points better than subprime lenders. You don't have to be a member to ask — many credit unions will tell you over the phone whether they lend to your score range.
Community banks and local lenders also work with lower scores more often than national chains. They may know your employment history or have other reasons to take a chance on you that a computer algorithm wouldn't catch.
Subprime auto lenders exist specifically for scores below 620. They will lend to you, but the interest rate is steep — often 15 to 20 percent or higher. If you use one, read the contract carefully for prepayment penalties (fees for paying off the loan early) and GPS tracking clauses, which some subprime lenders include.
A co-signer with a higher score can help you get approved or lower your rate. The co-signer is legally responsible if you don't pay, so choose someone who understands that risk.
What happens if you improve your score before buying
Waiting three to six months to raise your score by 50 to 100 points can save you thousands in interest. If you're at 620 and can reach 680, you might drop your rate from 14 percent to 9 percent — a real difference on a car loan.
The fastest ways to raise your score are paying down credit card balances (especially getting them below 30 percent of your limit) and making all payments on time for several months. Hard inquiries from car shopping do hurt your score slightly, but multiple inquiries within 14 days count as one inquiry, so shop around without penalty if you do it quickly.
Checking your own credit report costs nothing and doesn't hurt your score. You can get a free report once a year from each of the three bureaus (Equifax, Experian, TransUnion) at annualcreditreport.com. Look for errors — a missed payment that wasn't yours, or an account you never opened — and dispute it with the bureau. Errors can be removed within 30 days if the bureau agrees.
How different lenders view the same score
A 680 score means something different to a credit union than it does to a bank's captive finance arm (the lending company owned by the car manufacturer). Credit unions weight recent payment history more heavily. Banks weight the total amount you owe. Subprime lenders weight your down payment and income.
This is why shopping around matters. Get pre-approved or get a rate quote from at least three lenders before you go to the dealership. Pre-approval tells you what rate you actually may have access to for, not what the dealership will offer you (which is often higher). Pre-approval also gives you negotiating power — you can tell the dealer you already have financing and they have to beat that rate to earn your business.
Dealership financing is convenient but rarely the best rate. The dealer marks up the rate they get from their lender, so you pay more. The exception is when the manufacturer is running a promotion (0 percent financing for well-may have access to buyers, for example), but those promos only apply to the highest scores.
Down payment and score: how they work together
A larger down payment makes lenders more willing to work with a lower score. If you put down 20 percent instead of 10 percent, you're borrowing less money and the lender's risk drops. This can mean the difference between approval and rejection, or between a 14 percent rate and a 10 percent rate.
Lenders also look at the loan-to-value ratio — how much you're borrowing compared to what the car is worth. If the car is worth $25,000 and you're borrowing $20,000, that's an 80 percent ratio. If you're borrowing $22,000, that's 88 percent. Higher ratios are riskier, so lenders charge more or decline altogether. A bigger down payment improves this ratio.
Used cars are riskier than new cars (they depreciate faster and break down more often), so lenders charge higher rates for used car loans. A 680 score might get you 8 percent on a new car but 11 percent on a used one from the same lender.
What to do right now if you're planning to buy soon
Check your credit report for errors at annualcreditreport.com. Dispute anything that's wrong. This takes 30 days but costs nothing.
Pay down credit card balances if you can. Getting them below 30 percent of your limit raises your score faster than anything else. If you have a card at $5,000 limit with a $3,000 balance, paying it down to $1,500 will move your score noticeably within a month or two.
Make every payment on time for the next few months, even if it's just the minimum. One late payment can drop your score 100 points. One on-time payment doesn't raise it much, but three months of on-time payments shows a pattern.
Get pre-approved from at least three lenders — a credit union, a bank, and an online lender. Compare the rates and terms. This tells you what you actually may have access to for before you step into a dealership.
Frequently Asked Questions
Can I get a car loan with a credit score under 600?
Yes. Subprime lenders and some credit unions will lend to scores as low as 500 or below. The interest rate will be high — often 15 to 20 percent or more — and you may need a co-signer or a substantial down payment. Shop around; rates vary widely even for the same score.
Does shopping for car loans hurt my credit score?
Multiple inquiries from car shopping within 14 days count as a single inquiry, so you won't be penalized if you shop quickly. Each inquiry does drop your score a few points, but the damage is temporary and worth it to compare rates. Hard inquiries fall off your report after two years.
What's the difference between pre-approval and a rate quote?
Pre-approval means a lender has looked at your credit and income and committed to lending you up to a certain amount at a certain rate. A rate quote is an estimate. Pre-approval is stronger — you can take it to the dealership and use it as leverage. Get pre-approval from at least two lenders before you buy.
Should I wait to buy a car until my score improves?
If your score is below 640 and you can wait three to six months, waiting usually saves you more in interest than the cost of waiting. If your score is 660 or above, the benefit of waiting is smaller. If you need a car now for work or safety, buy now and refinance later when your score improves — most lenders allow refinancing after six to twelve months.
Can a co-signer help me get a better rate?
Yes, if the co-signer has a higher score and good payment history. The co-signer is legally responsible for the loan if you don't pay, so they're taking real risk. A co-signer with a 740 score can lower your rate by 2 to 4 percentage points compared to applying alone.