What Is the Minimum Credit Score for an Auto Loan?

If you are preparing to shop for a vehicle and you’re concerned about your credit score, you may be wondering what types of loans you can qualify for. The good news is that there is no universal minimum credit score for auto loans. However, most lenders want borrowers to have a score of 600 (or higher in some cases) to qualify for traditional auto financing. 

If you have a lower score, you may still qualify for other types of auto financing. Our guide unpacks the minimum score for auto loans so you can make an informed purchasing decision. You’ll also learn tips for improving your score so that you can access better rates and financing options. 

What is the minimum credit score for auto loans?

The minimum score for auto loans with traditional lenders is 660 or higher. Other lenders, such as local credit unions or online vehicle financers, may accept scores as low as 500-550. 

Lenders may be more flexible with vehicle loans compared to other types of debt because the loan is secured by the vehicle. If someone defaults on the loan, a lender can repossess the vehicle and sell it to recoup some or all of their money.

In general, the higher your credit score, the better options you’ll have access to. If you have a lower score, you’ll have to look at non-traditional financing or “buy here, pay here” (BHPH) lots. Here’s a closer look at credit score requirements by lender type. 

Minimum credit score by lender type

Different lenders have different risk tolerances, which impact the minimum score they will accept. Banks and most credit unions look for scores of 660+, although some credit unions may be more flexible. Online lenders may accept scores in the 550-650 range, although they sometimes accept lower scores.

BHPH lots are the most flexible. Some run soft credit checks, and others may not check your credit at all. However, they will verify your income and ability to repay. That flexibility comes at a cost. You will pay a much higher interest rate and may be required to make weekly or bi-weekly payments. 

Minimum credit score by loan type

The type of auto loan you apply for can also influence the credit score requirements you must meet. For example, if you are applying for a loan to purchase a new or high-end used vehicle, the lender may require a higher score due to the larger purchase price. 

Refinance loans tend to be more flexible than purchase financing, as you’ve already shown an ability to make payments. Most borrowers refinance to lower their monthly payments and interest rates. Many lenders will view this as a smart financial move that makes it easier for you to continue making on-time payments. 

How your credit score affects your auto loan rate

Your credit score doesn’t just determine whether you get approved, but it also influences your interest rate. Interest rates are based on market conditions, inflation, and individual applicant factors. 

For example, if you have a strong credit profile, you might secure a single-digit interest rate. If you have a lower score but still get approved, your rate could be 10% or higher. 

A few percentage points difference in your score could cost you thousands in extra interest payments over the life of your loan. If you have an auto loan with a high interest rate now, refinancing to a lower rate once your credit improves can unlock big savings. 

Can you get an auto loan with bad credit?

Yes, you may be able to get an auto loan with bad credit, but there are trade-offs. Here are the risks:

• Your interest rate may be higher
• A down payment could be required
• Loan terms may be shorter
• Vehicle options may be more limited

If you have a very low credit score and are ineligible for traditional auto financing, visiting a BHPH lot could be your only option. Unfortunately, these dealers charge higher interest rates. Many of them don’t report payments to the credit bureaus, which means that the loan won’t impact your score. 

How to improve your credit score before applying for an auto loan

If you have time to wait on your purchase and want to qualify for better loan terms, focus on improving your credit profile. Here are some ways to do that:

• Make all payments on time
• Reduce your credit utilization
• Check your credit report for errors
• Build positive activity, like reporting on-time payments
• Avoid any new hard inquiries

Tools like Kikoff can help you strengthen your profile by reporting on-time rent and utility payments. You can get credit for the positive behavior you are already exhibiting, which can lead to long-term improvements in your score. 

Conclusion

There’s no single minimum credit score for auto loans. But your score plays a major role in your approval odds and loan terms. If your score could use some work, Kikoff can help.

Add positive payment history to your credit profile with Kikoff.