What is a Good Credit Score for a Car Loan?

There's no magic number for car loan approval, but a higher score gets you better rates. Here's what you need to know.

Credit score basics for car loans

No minimum score is required to get an auto loan. Each lender sets their own standards. But your chances improve significantly at certain thresholds:

• Prime score (661+ VantageScore or 670+ FICO): Opens doors to better rates and terms

• Lower scores: You can still get approved, but expect higher interest rates

Lenders may use different types of scores - regular FICO Scores, VantageScore, or auto-specific FICO Scores. They all use a similar 300-850 range but might evaluate your credit differently.

How to build credit before car shopping

If you can wait a few months before buying, these steps can improve your score:

• Pay every bill on time. Late payments seriously hurt your score.

• Pay down credit card balances. Lower utilization can quickly boost your score.

• Keep old credit cards open. Closing cards can hurt your utilization ratio.

• Deal with collections. Paying or settling collections might help your score.

• Fix credit report errors. Check for mistakes and dispute them.

• Get added as an authorized user on someone else's well-managed card.

• Hold off on other loan applications until after your car purchase.

KOHO can help your credit history before car shopping

• Cost: $5-10 monthly (depends on your account type)

• How it works: Open a KOHO account and sign up through the app

• Benefits:

  • No hard credit check

  • No minimum deposit

  • Reports to major credit bureaus

  • Free credit score tracking

  • Automated payments to prevent missed payments

  • KOHO members have seen their credit scores go up by an average of 35+ points in just 4 months*

  • Cancel anytime

*Based on customers with credit score below 500, who signed up for credit building during September 2024. This is a representation of individual experiences and are not intended to guarantee a similar outcome. Credit Building is not a credit repair tool and does not guarantee an improvement in credit score. Credit scores are based on a variety of factors and outcomes may vary among users

Getting a car loan with bad credit

Bad credit doesn't mean you can't get a car loan, but it will cost more. Try these approaches:

• Check your credit report first so you know where you stand

• Get prequalified with several lenders to compare offers

• Save for a bigger down payment to reduce your loan amount

• Ask someone with good credit to cosign if possible

Avoid "buy here, pay here" dealerships if you can. They're usually the most expensive option and might not report your payments to credit bureaus.

Steps to apply for a car loan

1. Check your credit score to understand your approval chances

2. Shop different lenders - rates and terms vary widely between banks, credit unions, online lenders and dealers

3. Save for a down payment or prepare to trade in your current vehicle

4. Get preapproved before visiting dealers - this gives you negotiating power and protects you from dealer markup

Remember that multiple car loan applications within a 14-45 day period typically count as just one inquiry on your credit report, so don't be afraid to shop around for the best rate.

What this means for your car purchase

Your credit score significantly affects how much your car will ultimately cost. Even a small interest rate difference adds up to hundreds or thousands of dollars over the loan term.

If your score needs work and you're not in a rush, consider improving your credit before applying. But if you need a car now, comparing multiple lenders is your best strategy for finding decent terms regardless of your score.