What Is a Bad Credit Score for a Car Loan?

Lenders use different scoring models and criteria when approving bad credit auto loans.
Apr 12, 2022

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No single number defines a bad credit score for a car loan. In general though, if your credit score is below the mid-600s, you can expect higher interest rates and more difficulty getting a loan.

Because lenders consider many factors when approving loans, people with bad credit scores do get auto loans every day. They may have to supply more information to lenders, make bigger down payments, choose a less expensive car or accept higher rates.

Know where your credit score stands

When buying and financing a car, a good first step is to know where your credit score stands. You can get your credit report and score for free through NerdWallet, or you can request one free credit report per year from each credit bureau at annualcreditreport.com.

FICO and VantageScore are the two most commonly used credit scoring models, and each has scores ranging from 300 to 850. Some auto lenders also heavily use an industry-specific FICO model that weighs certain factors, such as past car-loan payments. Its range is 250 to 900. The cut-off number that places a person in a “bad credit” tier differs by credit scoring model, but it’s generally in the mid-600s or below.

While you can purchase your FICO automotive score, your basic free credit report and score should be enough to understand where you stand. You can compare your score to industry averages to measure how difficult it will be for you to get an auto loan — and at what interest rate.

Auto loan origination by credit score

People with all types of credit scores do get approved for car loans. Consumer credit reporting company Experian provides insight into the percentage of new and used auto loans financed by credit scoring tier.

The breakdown below uses the VantageScore model and reflects auto loans originated in the final three months of 2021.

Credit score

New car loan distribution

Used car loan distribution

Superprime: 781-850.

28.97%.

12.14%.

Prime: 661-780.

51.64%.

42.66%.

Nonprime: 601-660.

13.88%.

22.09%.

Subprime: 501-600.

5.28%.

20.28%.

Deep subprime: 300-500.

0.23%.

2.83%.

Source: Experian Information Solutions.

Auto loan interest rates by credit score

Car buyers with lower credit scores can usually find a lender willing to approve a loan, but they will typically pay more. Experian also provides a look at the average annual percentage rate for auto loans by credit score.

Credit score

Average APR, new car

Average APR, used car

Superprime: 781-850.

2.47%.

3.61%.

Prime: 661-780.

3.51%.

5.38%.

Nonprime: 601-660.

6.07%.

9.80%.

Subprime: 501-600.

9.41%.

15.96%.

Deep subprime: 300-500.

12.53%.

19.87%.

Source: Experian Information Solutions.

Based on Experian data, if you have a 500 credit score, you might see rates on a used car of about 19.87%, compared with 9.80% for a credit score of 650.

A borrower with a 650 credit score and a $20,000 five-year used-car loan would have monthly payments of about $423 and pay $5,378 in interest over the life of the loan. Someone with a 500 credit score and the same loan would have monthly payments of about $528 and pay $11,706 in interest.

Even if you can get an auto loan with a bad credit score, consider the savings if you can wait and build your credit first. If waiting isn’t possible, look into refinancing your auto loan to a lower rate after making six to 12 months of on-time loan payments.

Lenders look at more than a bad credit score

Even if your credit score falls into the bad range, it typically isn’t the only factor determining whether you can get an approved auto loan. Lenders will also take into account:

  • Your current income and expenses, including the debt-to-income ratio.

  • Employment history and time at current job.

  • Size of the down payment.

  • Value of the car you plan to finance.

  • Length of the loan.

  • The amount you have in savings.

Lenders will also consider the reasons for your poor credit. For example, did you fall behind financially because of extended hospitalization, being laid off or another situation out of your control? If so, and your financial situation has improved, lenders will usually consider that when making approval decisions.

Approval criteria can vary from lender to lender, as can the credit scoring model they use. So, it’s a good idea to shop for different lenders, enabling you to compare and find the lowest interest rate.

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