If you’re looking for a car loan, you’re probably wondering how high of a credit score you’ll need to apply. The answer to that question will depend on the specific lender that you’re interested in, but most car dealers will check your credit score.
However, a credit score of 700 will qualify you for most low-interest rate car loans, but it is still possible to get a loan if your credit rating is lower than this. Here’s what you need to know about your credit score if you’re planning to apply for a car loan.
Credit Scores Over 700 Will Get You the Lowest Interest Rates
If you have a credit score over 700, you will be eligible for most car loans. This means that you’ll be able to shop around for the best interest rates, which can save you a substantial amount of money over time. Credit scores that are over 700 typically will be considered very good or even excellent.
Credit Scores Under 500 May Disqualify You for Many Loans
In most cases, you won’t be able to get a car loan with a credit score under 500. However, there are exceptions to the rule. These loans usually charge a very high interest rate compared to most other loans, and they are set up for individuals with poor credit or no credit.
Keep in mind that car loans are secured, which means that the car can be repossessed if you do not make payments. As a result, it is often possible for car dealerships to offer financing to individuals with poor credit or no credit. That’s because car dealers that offer these loans do not even check your credit score.
Scores Between 500-630 May Often Mean High Interest Rates
Many lenders will allow you to borrow with a credit score of 500-630, but they usually will charge a somewhat higher interest rate than they would otherwise. Although, this does vary somewhat from one lender to another. However, many dealerships will avoid offering a loan to someone who has a credit score that’s lower than 600 unless they specifically offer financing for individuals with poor and/or no credit.
Many car dealerships do offer financing to people who have poor credit. Unfortunately, borrowers typically will have to pay relatively higher interest rates on these loans. This can lead to paying a significantly larger amount for the vehicle over time than the actual purchase price.
What if Your Credit Score Isn’t High Enough?
If your credit score is too low for you to get the car loan that you’re looking for, there are ways that you can improve it. In fact, ensuring that you make all of your payments on time can raise your credit score. This can allow you to qualify for larger car loans and pay a lower interest rate, but keep in mind that it will take a period of months or even years for you to reach your desired credit score.