However, a good score of 720 or higher will allow you to get the best rate. Consider spending some time improving your credit rating before you buy your next car. Even raising a few points can make a big difference if you have a low score. With a credit score of 620 to 629, you should be entitled to a high-risk APR rate, which will be higher than someone with a credit score of 700 or 800.
Technically, a minimum credit score is not required for an auto loan. However, the lower your credit score, the higher your interest rate, and vice versa. If you have bad credit, potential lenders interpret this to mean that you are a risky borrower. Therefore, they increase interest rates as a means of protecting themselves from financial losses.
In the table below, you can view the average interest rates for new and used cars by credit rating to see what effect they have. As you can see, your credit score has a big impact on the interest rate offered and on the cost of your loan. Interest rates vary depending on your credit score, so knowing what to expect on average can help you budget for your car. The higher your credit score, the better interest rates you'll get, as creditors have less risk of lending you money.
Therefore, the credit score that appears on your personal credit report may differ from what an auto lender can see. Most lenders like to see their debt-to-income ratio (DTI) below 40%, including their new automatic monthly payment. Your bank or credit union knows your finances and may consider information other than your credit rating when making an offer. Your credit score has a big impact on the interest rate offered to you and on the cost of your loan.
Credit Karma can help by showing the estimated term of the loan, the interest rate, and the amount of the monthly payment to lenders. Having a co-signer with higher credit scores on your loan can help you get approved more easily or get a better interest rate. However, getting a good credit score can help you a lot, in addition to buying a car. While a higher credit score is generally more favorable in terms of your interest rate, it's still possible to qualify for a loan with a lower score.
Your actual APR will depend on factors such as your credit score, the amount of the loan requested, the term of the loan, and credit history. We also have qualified professionals who can help you improve your credit rating and make car loans more affordable. Buying a car is a big financial step, and knowing your credit score can help you start the buying process on a solid footing. A lower credit score won't necessarily stop you from getting a car loan, but it could increase your interest rate and lead to higher payments.