The credit score needed to buy a car is actually much lower than you might imagine. Even car buyers with bad credit can purchase a new vehicle – however, a higher score will certainly get you a lower interest rate on a car loan. If you're not sure what your credit score is or how it will affect your vehicle-purchasing process – read on, and we'll get you behind the wheel and on the road in no time!
What Credit Score Do I Need To Buy A Car?
The best credit score possible is 850 (though any score above 800 is considered perfect) and scores above 700 are considered very good. When purchasing a vehicle, a credit score of 660 or above can get you a good car loan at a 6% interest rate or lower. Of course, if you purchase a used vehicle, your score does not need to be as high. On average, the credit score needed for a used car loan is 657 and 721 for a new car loan.
How Do I Check My Credit Score?
It's a good idea to check your credit score before making a large purchase like buying a new vehicle. All car dealers will check your credit before offering you any finance options, so it's good to know your score before going into the dealership. You can check your credit score for free (without lowering it!) by using annualcreditreport.com or by contacting your bank directly.
How Do I Increase My Credit Score?
If you've been denied a car loan or if you simply want to increase your credit score for a better interest rate, it is definitely possible to do so! You can start by making a monthly/yearly financial budget and paying your bills, student loans, and credit cards on time. Don't have a credit card? Get one! Credit cards are a great way to increase your credit and earn points for future travel. But, you must be careful to budget to pay off your card each month to avoid any unnecessary interest charges. Need to raise your credit quickly? Make a big payment on any debt you currently have or reduce your credit card balance by paying as much as you can.
Why Does My Credit Score Matter When Buying A Car?
Your credit score gives loan lenders and car dealerships a good idea of how reliable you will be when paying back your car loan. Your score reflects the rate and consistency at which you have paid other loans in the past and many lenders will even use auto-specific scores to weigh your past car loan payments against future loan options. If you make consistent loan and credit card payments each month, you shouldn't have anything to worry about!
If I Have Bad Credit, Can I Still Buy A Car?
The minimum credit score to buy a car is much lower than you think. According to the Experian Report in 2019, nearly 30% of car loans went to borrowers with credit scores of 600 or below and 5% of used-car loans went to people with credit scores of 500 or lower. So, it is possible to purchase a new car with a lower credit score – but it will cost you in interest unless you work with a trusted dealership, credit unions, or banks to get you a lower rate.
Have a bad credit score and still want to buy a car? We can help. Our staff members are highly trained in finding the best finance options available for all of our future (and returning) car buyers. Contact us today for a quote on a new or used vehicle!
- Your friends at Bob Penkhus VW