Average Credit Score Needed To Buy A Car
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Average Credit Score Needed To Buy A Car
There is no set credit score you need to get an auto loan. If you have a credit score above 660, you will likely qualify for an auto loan at a rate below 10% APR. If you have bad credit or no credit, you could still qualify for a car loan, but you should expect to pay more.
Your credit score is how lenders measure your financial stability and determine how well you can pay back debt. Credit scores are broken into tiers. Experian gives the following tiers and score ranges for auto loans.
Experts recommend that you keep your total transportation costs to less than 10% of your budget. If you have a low credit score, you will pay more in interest, so you should aim for a less expensive car and/or have a high down payment.
FICO Score. Your FICO Score, developed by Fair Isaac Corporation, is the most commonly used credit score method by far. It heavily weighs your payment history and how much debt you have compared to your credit limits. It takes about six months of credit history to develop a FICO Score.
You could be able to get a bad credit car loan with a 500 credit score. Having a high down payment, getting a good deal on the car and having a cosigner can all improve your likelihood of being approved.
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While there is no official minimum credit score required to apply for auto loans, lenders have minimum standards that they look for when reviewing your application. And, as a general rule, the lower your credit score, the more interest you will be charged.
The minimum credit scores to qualify for auto loans vary based on the lender and the car you are looking to finance. Some lenders may consider you if your credit score is below the advertised minimum if you are a current customer or can otherwise prove to them that you are a low-risk borrower.
A credit score is a numerical representation of how likely you are to repay a loan. The higher your credit score, the less risky you are considered and the more likely you are to receive a favorable interest rate on your loan and better terms.
The FICO score is the most widely used score for auto loans. The score ranges from 300 to 850. The score is calculated based on credit mix, payment history, amount owed, average credit history and available credit.
The less risk you present to lenders, the lower the interest rate you can expect to pay. All rates mentioned are averages for new cars from the first quarter of 2022, according to the Experian State of the Automotive Finance Market report.
Those with credit scores under 500 are considered to have deep subprime credit and will likely face the highest interest rates. The average auto loan interest rate for the deep subprime category was 12.93 percent. But, depending on your income and other factors, you may not even qualify for financing with a credit score of 500.
This wider range is considered prime. And with an average interest rate of 4.9 percent, you can shave thousands of dollars off the cost of your loan by upping your credit before applying for an auto loan.
While knowing your credit score will be a key factor in the auto loan approval process, it is not the only factor. Keep up to date with your credit score and work to im