Can you buy a car with bad credit and if so, how bad? We're exploring what it means when you have deep subprime credit, and if you can still get an auto loan with these scores.
What is deep subprime credit? Deep subprime credit refers to someone in the lowest credit tier according to the FICO credit scoring model. This means you have a credit score below 580 and are considered to have bad credit. When it comes to a car loan, this means it can be challenging to get financed, with higher costs when you do. This is because interest rates tend to be higher the lower your credit score is. Interest is the cost of borrowing money, and the better your credit, the less it costs.
What FICO score is considered deep subprime? Credit scores go far beyond good and bad when it comes to buying a car. Most lenders rely on your credit score to determine your auto loan eligibility. Your credit score is a number between 300 and 850 on the FICO credit scoring model. FICO isn't the only credit scoring model, but it's the most widely used among auto lenders.
On the FICO scale, there are five credit score tiers: poor, fair, good, very good, and exceptional. These tiers coincide with score ranges and are only one naming convention. These days you're more likely to hear credit in these terms; deep subprime, subprime, near-prime, prime, and super-prime.
No matter what you call it, deep subprime credit is the lowest tier there is, and typically, the breakdown looks like this:
- Deep subprime – 300 to 579
- Subprime – 580 to 669
- Near prime – 670 to 739
- Prime – 740 to 799
- Super prime – 800 to 850
Notice that the lower you go on the FICO scale, the more widely the credit scores range. According to Experian, in 2021 nearly 30% of Americans fell into a subprime credit category.
Can you get a car loan with deep subprime credit? When it comes to credit scores, deep subprime doesn't leave you out of the running for an auto loan. It may make things like traditional bank loans and loans from some captive lenders more difficult to get, but if you work with the right lender you may still have a chance at financing.
Do lenders finance with bad credit? Subprime lenders work with borrowers in many different credit situations, including deep subprime in some cases. These lenders know that you're more than just a number and look at more factors than just your credit score to help qualify you for financing. Generally, they're looking to make sure you meet their basic requirements, and that you have the ability, stability, and willingness to repay an auto loan.
Your ability has to do with if you can pay for an auto loan. This means proving your income and employment, as well as showing you have an acceptable debt to income and payment to income ratio.
Stability is proven with a recent utility bill or bank statement in your name, as well as a list of personal references. And your willingness has to do with how much of your own money you're willing to invest in your auto loan upfront when making a down payment.
Our take. If you meet these lender stipulations and requirements you could be well on your way to an auto loan, even with deep subprime credit. Not sure where to start? We've got you covered at Auto Credit Express, simply fill out our fast, free car loan request form.