People buying a car
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Need to Buy a Car? See If Your Credit Score Meets Loan Requirements

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Mar. 23 2022, Published 11:30 a.m. ET

According to a study by the Federal Reserve, around 35 percent of American adults relied on an auto loan to pay for a car in 2019. So, if you plan to buy a car, you will likely need an auto loan to pay for it. What credit score is needed to buy a car and what if you don't meet the requirements?

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Lenders use credit scores to decide whether to provide loans to borrowers. Credit scores are three-digit numbers that are used to determine whether your credit cards and loan requests will be approved or denied. The scores, which usually range from 300 to 850, represent your ability to pay back a loan.

What minimum credit score is needed for a car loan?

For car loans, there isn't one magic credit score that will do the trick. There are a lot of different credit scores and each lender has its own specific requirements. One of the most common scores used by lenders for approval of car loans is the FICO score with more than 90 percent of top lenders using it. However, FICO has different versions and industry-specific scores.

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You can also ask lenders which credit score they use before you consent for a credit check. While there isn't one score that lenders look at, it's definitely easier to get approved if you have a good credit score. The lower your score is, it's harder it gets to get approved for a car loan. Even if you get approved, you might end up paying a lot more in financing charges than someone with comparable needs but with a good credit score.

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According to Forbes, Experian released its State of the Automotive Finance report in the second quarter of 2021. Here’s how many people got car loans within the different credit score ranges:

Credit Score RangePercent of all auto loans
Super prime (720 and above)20.61 percent
Prime (660-719)44.26 percent
Near prime (620-659)17.95 percent
Subprime (580-619)15.20 percent
Deep subprime (579 or less)1.98 percent

In general, lenders look for borrowers in the prime range or better. Therefore, a score of 620 or better will enhance your chances of getting a car loan at favorable terms.

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Can you get a car loan with a poor credit score?

There are still ways you can qualify for a car loan with a poor credit score. But most of the time, it comes with a higher interest rate. According to Valuepenguin, consumers with high credit scores (760 or above) can have their auto loan applications approved for interest rates as low as 3 percent while lower scores are riskier investments for lenders and generally pay higher interest rates — as high as 20 percent.

Another way you can increase your chances of getting a car loan without having a perfect score is to apply for a loan with a cosigner. A cosigner is someone, a family or a friend, who has a good or excellent credit and is willing to apply for the loan with you. A cosigner shares the responsibility of the loan with you.

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