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  • How Low Can My Credit Score Be To Get A Car Loan?

    What Credit Score Is Needed To Buy a Car?

    What is a good credit score to buy a car or qualify for car loan?

    The answer to this question is not going to be a single credit score because lenders look at each loan differently.

    Each bank will offer loans that they believe to be fair for your credit history and credit rating. In this article, we will look specifically at auto loan lenders and car loans to answer the question, “What kind of credit score to buy a car do I need?” because you will find there is a big difference in car loans and credit scores versus other types of credit lenders.

    Valley Auto Loans has helped hundreds of applicants with a minimum credit score for a car loan, that not only got them a good car but rebuild their credit rating fast.

    A Low Credit Score Looks Different On Some Folks

    Qualifying for a car loan with the lowest credit score will typically be considered on a person by person basis by the lender you choose to apply with. Borrowing money with your personal credit score will be viewed differently by each lender who reviews your application and here is why.

    With a high credit score, the lender will not be as concerned with your past credit history because you will already have qualified for a decent APR. However, for someone with a low credit score, the lender will need more information than just their credit score to make a loan offer.

    Lenders realize that a minimum credit score does not necessarily mean that you cannot pay back a car loan on time. So they will look closer at your credit history, especially any car loans you have had in the past. This review will provide them a better idea of how you will handle your vehicle loan.

    How Your Credit Score to Buy a Car Is Evaluated.

    Credit Classification Credit Rating Difficulty to Qualify For a Car Loan

    Bad Credit 400 – 559 Expect to be rejected by most lenders. Auto lender who will provide financing will charge high interest. These loans should only be used to repair your credit and obtain dependable transportation. This is the lowest credit score for a car loan and will be an expensive auto loan.

    Subprime Credit 560 – 649 Again, subprime lenders will charge higher interest rates, but the choice of loan terms and down payment that are required are more diverse. Even if you find a reasonable monthly payment, these loans should only be kept long enough to repair your credit rating. However, overall, this is an acceptable credit score to buy a car.

    Average Credit 650 – 699 This is where it gets tricky. At this point, it is important to shop around for the best APR rates. With low credit scores, you will shop around to find lenders who can finance your loan. However, with an average credit score, you will need to research and compare several auto lenders and look closer at the low APR they offer. You will find a broad range of auto loan terms and percentage rates in this credit score range. That is why it is important to shop lenders. A few points can save hundreds of dollars a month.

    Good Credit 700 – 749 This is what you are working for as a goal. Any auto lender will offer you a car loan, and you will find a variety of loan benefits, term choices, and low-interest rates. You have the option of higher monthly payments and shorter loan terms; or lower payments, no down payment options and longer loan terms.

    Excellent Credit 750 – 850 Auto loans are easy to get from the best banks and credit unions. You will enjoy easy terms and the lowest interest rates. Obviously, this is the best credit score needed to buy a car at the lowest APR rate.

    As you can see, your credit score will be a major part of qualifying for a reasonable car loan. Of people shopping for cars, automotive purchase reporting shows that only 1 in 10 will pay for the car with cash on hand. The other 9 will use auto finance lenders and of those, a major part of them will have bad credit or the minimum credit score to buy a car.

    Auto Loans for People With Subprime or Bad Credit

    When you apply for a car loan at a car dealership you will find that not all car dealers will use subprime auto lenders.

    If your credit score is low, your loan will be considered high risk, and you will likely be denied for financing. At this point, bad credit car buyers will turn to Buy Here Pay Here lots or car dealers who offer in house financing.

    Most people with bad credit trying purchase a car will gladly accept the loan terms from these types of car lots. However, with the lowest credit score, you should consider the impact that this loan will have on your ability to repair your credit rating.

    1. These dealers offer to finance only to sell cars. They know people with bad credit will pay higher rates and longer terms to get the vehicle.
    2. These dealers are not looking out for your best financial interests. They expect that half of the car buyers they finance will miss payments and half of them will default on the loan altogether. The cost for repossessing a car by the dealer are typically calculated into the by here pay here loans. In most cases, this can seem unfair to the buyer.
    3. By using in-house dealer financing, you could miss an opportunity to build your credit score and repair your credit history.
    4. Remember that the main reason to finance a car loan with bad credit is to improve your credit. Even a high-interest car loan will fix your credit rating fast.

    If you have a below average credit score, you can expect to pay on average three to five times more in interest that the typical borrower.

    In time everyone can build up a bad credit rating to qualify for the lower interest rates. Most people know the basics.

    • Lower your debt to credit ratio or pay down your debt as much as possible.
    • Pay your monthly payments on time.
    • Maintain open credit accounts in good standing.

    These credit building practices work well but require time and money to accomplish.

    If you can put off buying a car for a time, then start setting aside the money you would be paying for your monthly car payment. This will give you a chance to collect a better down payment. Paying a larger down payment will automatically lower your payments no matter what interest rate your new car loan will carry.

    What Low Credit Score Loans Will Cost You

    If you have checked your credit score and then tried to get a car loan from a car dealer, you will probably notice they see a lower credit score than you see from other credit reporting agencies like Equifax, Experian, and TransUnion. That is because car dealers and auto lenders use an automotive based credit history. This automotive credit report shows in great detail your past credit experience with any auto loans you may have had.

    When you shop for auto financing with a low credit score to buy a car, you will also find that loan financing APR rates from car manufacturers such as Ford, GM, Toyota and so on, will vary. Don’t accept the loan offer from the dealer without checking other lenders as well. Just because you are at a particular car dealer, and they offer their brand name financing, does not mean you are getting the best financing for your vehicle loan. Many people have received bad loan terms from major auto loan lenders.

    If your credit score is below 550, a loan for a new car will cost you five time more in interest than someone with good to excellent credit.

    Let’s look at it broken down from good credit to bad credit.

    Average Credit Score Financing A New Car Loans For A New Car

    Last year the average cost of a subprime car loans was 10.65%

    Remember that these high-interest loans should only be used for building credit. Refinancing these loans after your credit improves will lower your interest rate and shorten your loan term or lower your payments.

    Use Your Car Loan to Build Your Credit Score; Refinance Is A Must.

    Let’s look at a typical high-interest loan scenario of someone with a minimum credit score for a car loan. We will see how using high-interest loans can quickly build your credit score.

    Starting with a credit score of 550 this person took out a loan at 18% APR and made a $1000.00 down payment. His monthly payments were $265.00 for 73 months.

    At that time and with that credit score, this was the best loan deal he found. However, in five months time with on-time car payments and no other late payments on his other debts, his credit score rose to 640.

    He checked with some auto refinancing agencies and found one to refinance his car loan at a much lower rate. With a plan to cut his debt he applied a $4000.00 payment to the principal and refinanced the car loan at 6.75% for 60 months.

    The new loan also lowered his monthly car payments to $196.00.

    With planning and hard work, you can rebuild your credit score in a short amount of time and get rid of those high-interest loans.

    Here are some helpful tips to follow when searching for auto financing with a low credit score to buy a car.

    • Start by searching dealer tricks and sales scams on the internet. Learn what the dealer is targeting when you walk onto the dealers’ lot. They will be surprised when their tricks do not work on you!
    • Try to sell your old car yourself, instead of passing your equity to the dealers pocket. You will always get more for your car by selling it outright instead of trading it to the dealer.
    • Don’t let the dealer work the vehicle deal by your monthly payments. Always go for the lower APR. Dealers will get you lower payments with longer loan terms and higher interest rates. This will cost you more in the long run.
    • Do not accept ridiculous loan terms like six or seven-year terms. Remember that there is potential for financial trouble that can occur in that length of time and the interest paid will be excessive.
    • Bear in mind that dealers will use scams like calling you a month or two after you take possession of the car and tell you that the loan fell through and you need to come in and redo your financing. This is a scam to lock you into a higher APR or higher payments on a different loan contract.
    • Choose a car that you will be happy with for a long time. Save money for your next car after you pay off your car loan.
    • Make extra payments to the principal and pay off the car as soon as possible.

    We hope this information has helped you to become more car loan savvy.

    Most people have fallen into bad credit problems by circumstances beyond their control. Loss of job, unexpected emergencies and events may have dropped your credit score, but there are things you can do.

    Use credit wisely and use new car loans to work for you to build credit and will not add to the damage.

    Valley Auto Loans is ready to help you with New and Used Car Loans, Subprime Car Loans, Auto Refinancing and more. Apply today! It only takes a few minutes. We will help you figure out what credit score is needed to buy a car in your circumstances.

    We also offer many how-to tips for car owners and other auto financing aids to help you with whatever credit problems you have.

    Let Valley Auto Loans get you on the road to better credit with new car financing.

    Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!

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    I am not sure of how strict Ford financing is, but with a 750 average score, I don't think too many lenders would ask for income verification. I would try to have a couple thousand dollars at hand for a down payment if needed. All you can really do is try and see what happens. Just make sure that you do all of your auto loan inquiries within a fourteen day period so that they will be scored only as one inquiry with versions of FICO. Note: you will still see all the inquiries on your reports, but they will only be scored as one. I believe that is would be better to apply for financing at the dealership once you have the car picked out, lenders are more apt to issue loans when they know exactly what the loan is for and the finance people at the dealerships know all the tricks to get someone approved as they want the sale to go through just as bad as you do.

    Could a low CIBIL Score affect Car Loan?

    Credit Score of 750 = Easy approval on Loans/Credit Card! Check now in less than 3 min!Check for FREE

    In today's fast-paced world owning a car has become a top priority. However, you’re worried bad credit could put a dent in your automobile aspirations. Fret not, for there are ways and means of navigating around such obstacles.

    While it is certainly true that people with good credit history and high CIBIL scores stand a better chance of landing a car loan, ones with a less than satisfactory credit past can still put their apprehensions about applying for a loan to rest, as long as they work towards getting their finances in order.

    There have been numerous instances of people with low credit scores taking out car loans from unscrupulous lenders at exorbitant interest rates, which not only plunges them further into debt but negatively affects their credit scores in the long run. Therefore, it is always advisable to get your CIBIL scores up to an acceptable level before applying for a loan.

    Most banks usually accept a CIBIL score of 750 for a car loan, so keeping the following things in mind can significantly raise the likelihood of eventually procuring the car you’ve always wanted. The journey may be long, but getting there in the end is what ultimately matters.

    Look over your credit report thoroughly

    The first thing you can do to get your act into gear is by obtaining your credit report and going through it with a fine-tooth comb. Check your CIBIL score and figure out ways and means of improving it by coming up with a concrete plan and sticking to it.

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    Paying off any outstanding loans and EMI’s can go a long way in ramping up your credit score.

    Any delay in payments towards loans or credit cards, or for that matter even failing to make regular payments, can significantly lower your CIBIL score.

    Identify and rectify errors

    Weed out any errors you my come across in your credit report and work on getting them fixed at the earliest to increase your chances of obtaining a car loan. There could be discrepancies in the report that have dragged your score down to a lower figure than it really should be.

    Avoid applying everywhere all at once. An inquiry on your file is created every time your credit report is accessed by a lender. Too many inquiries within a short span of time can weaken your CIBIL score, so spread your loan applications over a substantial period of time.

    Better score, better rates

    Improving your CIBIL score can help you attract better interest rates, which can help you pay off your loan in a shorter period of time. Therefore it is advisable to raise your credit score as much as possible before applying for a car loan.

    Show you are creditworthy

    Carrying documents like your salary/pay slips, that verify you have stable employment, as well as any other proof clearly showing that you make regular payments towards utilities like water and electricity for example, can help you gain a slight edge when approaching a lender for a car loan. This shows that you can be a good credit risk despite a low CIBIL score.

    Investigate, Explore, Enquire

    Do your research. The last thing you need at this point is a shifty loan shark driving you into a deeper ditch than the one you’re trying to get out of. Ask around and get second opinions if you have to, but make sure you don’t end up like a deer in the headlights when negotiating a loan deal.

    Increasing Your Credit Score from 550 to 750 in Twelve Months

    It seems like every day that I run into someone who tells me that their credit is seriously messed up and beyond repair, whether it be the result of a divorce, student loans, or old debts that they never paid off. Everyone thinks that their situation is worse than anyone's has ever been and that their credit can never be fixed. Does this sound like you?

    Well, for you and all the people that think their credit can never be repaired I have news.

    First, let's talk about the three credit bureaus and your credit scores. There are three bureaus that lenders use to check your credit. Some may use more than one, but the majority simply pull from one bureau. About half the time, when you default on a debt, it is reported to all three bureaus. However, it may also be reported to one or two of them. Each bureau scores in pretty much the same way. Credit scores go from 300 to 850. 300 is dismal and 850 is perfect. Most people that I talk to think that their credit score is around 300. However, after checking many people find that their scores are higher. It is definitely worth trying.

    What Does Your Credit Score Mean?

    Believe it or not, to get approved for a mortgage, car loan or any other type of financing, all you need, assuming you have the income to make the payments and employment and stable housing, is a credit score of 620-650 or higher. A credit score of 750 will pretty much guarantee that you are approved for whatever you are attempting to finance, and it doesn't take very long to achieve this kind of number.

    Getting a Copy of Your Credit Report

    The law allows for two instances where a person can obtain a totally free credit report:

    • Once per year.
    • When you have been turned down for financing based upon your credit report if requested within an allotted period of time.

    The official site for the free yearly report is You'll have to verify some information so that they know it is really you. This site does have a function for online viewing.

    What you want is a site that will let you pull a fresh copy of your report whenever you want, so that you can see how your efforts are affecting your scores. You also want a company that lets you view all three at once, in an easy format. The only company that I have found that offers these things is called Credit Check Total. I won't include a link lest someone think I am hawking an affiliate product (I'm not), but I do recommend them and use them myself. It's twenty bucks a month, but you can look at your credit report as many times as you want. Whenever I have had a question it's easy to get them on the phone and get an answer.

    The first thing that you'll want to do is sit down and make a list of your debts. I would separate them into three categories, which I affectionately call:

    • Probably—Can pay off in one lump sum.
    • Possibly—Will take longer to pay off.
    • Hell No—Just can't pay off.
    1. Now, go through your list and cross off any debt with a most recent date of activity that is six years old or more. Generally speaking, a delinquent account can show up on your credit report for up to seven years from the time your first delinquent payment was originally due on the account. These debts will drop off by the time our twelve months are over, so we don't need to worry about them. One exception to this rule is a student loan, which will never fall off your credit report until it has been paid in full.
    2. Take a pen and paper and make a plan to pay off all of the "probably" debts over the next twelve months. You'll want to pay them off in one lump sum—,we'll go into why later, so make sure that you allow for that. If you only have $100 a week you can spare to pay these debts and the amount owed is $400, then allow four weeks for that particular debt. Remove the probably's from your list.
    3. Look at how much money you have left over and determine if you can pay off any of the "possibly" debts. If you can, make a plan for those and remove them from your master list. Now, you should be left with a few possibles and one or two "Hell No's". We have a plan for these, don't worry.

    There are two ways to remove negative items from your credit score, and one isn't to pay them. At least, not just to pay them. There is a process for paying off your debts and if you head into this venture gung ho and start calling up every creditor on your list, you'll do a lot more damage to your credit score than is already done.

    First, let's discuss the two methods of removing negative information.

    Method One: Pay the creditor and request that they remove the negative information. Basically, they withdraw their submission of unpaid debt. Some will tell you that they are unable to remove the information and if they are the original creditor, this is utter horse dung. They are perfectly able to remove it. Now, be forewarned, you may have to get tough with some of these creditors and explain that you are attempting to clean up your credit. Tell them that you are making those creditors who are willing to remove the negative information for payment of the debt a priority and if they refuse to remove it, then you will be forced to put them at the bottom of your list. They may threaten to see you in court and garnish your wages and take your first born baby, but in fact 99.9% of the time they will do nothing of the sort.

    A different situation exists if the original creditor has charged off the debt and sold it to a collection agency. You'll know if this has happened, because when you call the original creditor, they will tell you to call so and so collections. Do not plead or argue with the original creditor to remove the debt or take your money. It will not work. As far as they are concerned you no longer owe them money, your debt was paid by the collection agency that bought your debt. Instead, simply thank them, hang up, and move that particular item to the "Hell No" column.

    When we begin the plan, you will call one creditor at a time from your list of probably's, only after you have the money in hand to pay the debt in full. You will then attempt to negotiate a settlement for complete removal of the negative information from your credit reports (however many it exists on) and get that promise in writing from them, as well as the settlement amount. When you have it in writing, you pay that creditor and you move onto the next one.

    Method Two: Obviously, we're not going to be able to pay everything on our credit report in most cases, so we have a different method for dealing with these debts. You are going to dispute them. Pick one debt per two week period and send a certified letter ( not a phone call, a letter) to the credit bureaus that list the debt and dispute it for whatever reason you can think of. You can say the dates are wrong, the amount is wrong or the debt simply isn't yours or it was paid.

    A law exists that credit bureaus must remove negative information if the customer disputes it, and the company that listed the debt doesn't prove that the debt is owed and is correct within thirty days. Most companies fail to send it off within the thirty days and many may not even be able to find the records, especially if the debt is a few years old. However, if you send in too many requests at once you will be flagged as a frivolous disputer, and you won't get anywhere. Send one debt in every two weeks, or even more spaced out over the year period if you only have a few.

    These two methods combined are going to remove almost all of the negative information from your credit report and will bring the score up considerably. However, we are not finished. At the same time that we are removing negative information, we're also going to rebuild your credit.

    The very first month that you begin this program I want you to beg, borrow, or steal $300 and get yourself a secured credit card. A secured credit card is one that works exactly like a credit card, but with the credit line secured by a cash deposit, which you usually receive back within a year of using the card responsibly. This is not a debit card. The money you secure it with is not yours to spend, it's your collateral to obtain this credit card. There are many companies that offer this service. Before you go shopping for one, I want you to find one that meets the following criteria as closely as possible.

    • Reports as a credit card not as a secured credit card.
    • Reports to all three bureaus.
    • Reports minimum quarterly, preferably monthly.

    The first is non-negotiable. You must find a card that reports as a regular credit card or you will benefit very little from what we're about to do. The second is almost as important, since we never know which credit bureau a potential lender will pull from. The last, monthly or quarterly. Make sure it's one or the other.

    Now, begin using the card to buy something each month that you were going to pay cash for. Put the cash away and when the credit card bill comes, for gosh sakes pay it.

    Repeat in month three. Yes, I'm telling you to come up with another $300 and get a secured credit card from a different company. Use it the same way, spending say $10 a month and paying it off immediately when the bill comes. No late payments, no “I'll pay it next month” and no paying the minimum. Pay the entire bill off each month on both cards.

    Finally, in about six months you're going to go shopping for a store credit card. These are quite easy to get with very little of a credit history and you should be able to get one quite easily. Then, use it just like the secured cards until the end of the twelve month period.

    Use the credit checking website you joined up with to monitor your credit as you pay off debts, get them removed, and dispute others. You will also see good payments begin to appear and your score will begin slowly climbing up, gaining more and more momentum. With these steps, you should be able to move from 550 to 750 in a year. Good luck with your journey!

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