Are you planning to have a new set of wheels? And you have narrowed down the make and model, and now you need to arrange finances to drive your car off the lot.
Buying a new car (or a used one) can be a big financial cost and for most people getting some form of a loan becomes a must.
You might wonder that there is no minimum credit score, but your low credit score will make it harder to get car loan approval. It is very important to keep in mind that a low score won’t necessarily bar you from car loan.
But, your solid credit score can land you stronger rates and terms.
Credit Score and Comparative Car Loan Rates
If your credit card score is 781 and above, you can expect to get the lowest rates.
As a super prime borrower, you can receive a new car financing at a rate of 2.6% on average.
On the contrary, if you are a deep subprime borrower with a credit score of 500 and below, then you will receive a new car loan rate of 13.53% on average.
Deep subprime borrowers can expect to pay around five times more for a new car loan.
The Good Credit Score for Car Financing
Generally speaking, the good credit score depends on the lender you are applying with. Different lenders have different criteria, so the minimum credit score to qualify car loan will vary depending on which company is providing the financing.
According to a 2016 report from Experian Credit Score Bureau, the average credit score to qualify for a new car loan was 714 and for a used car was 678.
And at the end of 2017, the average credit score for a new-car loan was 713, and for a used-car loan was 656, according to an Experian report.
If you have a lower rating, even then you may qualify for an auto loan as your lender may extend higher interest rates or frailer terms for your loan.
The Minimum Credit Score to Buy a Car?
No, there is no minimum credit score for a car loan. In fact, people with very poor credit score like 500 or less can apply and qualify for auto financing.
There are specialized lenders who lend money for car financing but with typically higher interest rates.
Big name lenders often enforce minimum credit score requirements and may make it difficult for you to qualify with a low rating.
According to loan data, US Bank requires the highest credit score among banks and lenders at 680, while Wells Fargo requires a low 550.
If you have an account with a local bank or credit union then your previous relationship may help you qualify even if you have a low credit score, but it entirely doesn’t mean you shouldn’t do things to improve credit rating.