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What is a good credit score to buy a car? - 2024-02-12

Generally we can see in different ads, like “we help you get your vehicle with bad credit, no credit or even if you have bankruptcy”: we will discuss what is a good credit score that can help you buy a car with low interest rates. So a score above 650 is acceptable for any car loan company, but if your score dips below 650 or 600 then you need to pay higher interest or can face hardship in securing your car loan. If you have a lower score, the best idea is to find a co-applicant with a good score that can help you secure your loans and can get you better interest rates.

If you have a credit score below 500 then you may face trouble in getting a car loan from a traditional lender and if you manage to get an approval then end up paying very high interest rates, interest rates can range between 20 to 47 percent.

If your score lands between 500 to 660 then also finding a lender can be challenging, as from the lender's point of view you can default your loan. But if you are able to find a lender then end up paying high interest, interest rate can range between 10 to 35 percent.

If your score is above 660 then eventually you land in a zone where you easily find a lender as it is an acceptable score for most of the lenders. Also better you can shop around and negotiate that can help you to get lower interest rates, interest rates range between 0 to 10 percent.

If you have bad credit definitely you can secure a car loan. It can be very challenging but nothing is impossible; but you can end up paying very high or higher interest rates. Generally lenders are open to car loans with lower rates, it's for sure big financial institutions or credit unions might not lend you. But there are lots of alternative lenders from where you can secure your car loan, keep in mind they can charge high to very high interest rates. But an alternative is you can look for a co-applicant with a good credit score, secure your loan with an asset like home, jewellery or a vehicle you have paid off to secure your repayments this will also lower your interest rates, also apply to those lenders who is offering car loans with bad credits, but this car loans will be costly (high to very high interest rates) and lastly you can pay higher cash down payment for your vehicle which can also increases chances to get approval because it reduces the overall loan amount.

So the bottom-line, it is always better to improve your credit score than applying for a car loan or any loans or mortgage. Yes, if you can secure a car loan then it can improve your credit score, all you need to do is pay all your payments on time and in full. As your payment history can make up 35% of your credit score, so always budget a car loan before applying or planning to buy a car. Higher the interest rate higher will be your total loan cost, like if you have financed a car of $37000 with a 4-year loan at 4.03% interest rate, you will pay $836 monthly payment and that will make $3124 in total interest; whereas if you have financed the same car at 12.84% then your payment will jump to $990 per month and that will make $10505 in total interest; creating a difference of $7381. So before going to a dealer it's always better to get a loan quote from one or more financial institutions. This can help you get the best loan deals and give you a scope to negotiate with the dealer. Always determine your budget before committing for a loan. The specific credit score required to buy a car can vary depending on the lender and the type of financing you're seeking. A good credit score to qualify for favourable auto loan terms is typically considered to be around 700 or higher. With a score in this range, you're more likely to qualify for lower interest rates, which can save you money over the life of the loan.

Keep in mind that in addition to credit scores, lenders also consider other factors such as your income, employment history, and debt-to-income ratio when determining loan eligibility. It's a good idea to check your credit score before applying for a car loan, and if your score is on the lower side, you might want to explore ways to improve it before seeking financing.