Well in advance of beginning your search for an auto loan, you're going to want to know your credit score. Lenders use it to decide whether or not you'll be approved, as well as to set your interest rate. So, if you're struggling with bad credit, you'll want to know the credit score needed to get a car loan.
The Credit Score Needed to Get an Auto Loan
Answering the question "What credit score is needed to get a car loan?" is a tricky task. It's hard to put a number on the score needed because every lender is going to have their own minimum requirements.
However, we can use real-world data to get a better idea of what it takes. Credit bureau Experian breaks down the auto loan landscape four times a year in their State of the Automotive Finance Market report. Their latest report shows that the average credit score of borrowers who financed a new car was 716 in July, August, and September of 2017. For used car loans, the average score of consumers was 659 during that time frame.
The credit score Experian uses ranges from 300 to 850, the same as the FICO scoring model. You'll want to focus on your FICO credit score when preparing for your loan because it's the one used by most lenders.
What if I Have Bad Credit and Need a Car Loan?
If your credit score falls below those average numbers, it doesn't mean you won't be able to qualify. Experian's report shows that 38.95 percent of all new and used car loans (and leases) started in the third quarter of 2017 went to borrowers with credit scores below 660. When focusing on consumers with credit scores of 600 and below, that number is still at 19.39 percent.
Experian's data shows that consumers with bad credit can still find ways to finance a car. This is a fact that the Auto Credit Express team knows well, as our service helps consumers struggling with credit issues find auto financing. However, you should keep in mind that borrowing with bad credit will come with higher interest rates.
Planning Out Your Bad Credit Car Loan
Because your interest rate has a large impact on what you end up paying, we recommend that consumers with bad credit take extra care to understand the car loan process so they can make informed choices.
That process starts with pulling your credit reports and looking at your credit score months in advance of applying for a car loan. This will help you understand your situation so you can find ways to improve it, if necessary. Plus, you can look for errors that could be bringing down your score, which you can dispute and have removed.
Consumers can get a free copy of their credit reports from each of the three credit bureaus (Experian, Equifax, and TransUnion) once every 12 months. These can be requested at www.annualcreditreport.com. There are ways to get a look at your credit score for free, but you may need to pay a small fee to get your official FICO score.
The Bottom Line
If you decide that you want to improve your credit score before applying for a loan, make sure you: pay all of your bills on time, get current on any past due payments, keep credit card balances low, and dispute incorrect information on your credit reports. Improving your credit is a process that takes time and dedication, but it's worth it in the long run when you're able to qualify for better rates and terms on loans and credit cards.
If, however, you need a car right now but are dealing with less than perfect credit, Auto Credit Express may be able to assist. We connect consumers to local special finance dealerships that help people dealing with credit troubles. Get the process started by filling out our free, no-obligation car loan request form today.
