How High Does My Credit Score Need to Be to Buy a Car?

How High Does My Credit Score Need to Be to Buy a Car?
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As of August 2013, the average new car cost slightly more than $31,000. Even if you're looking for a used car, you might choose to take out a loan to spread the cost of the car over time. Before giving you a loan, the lender checks your credit to evaluate the likelihood that you can pay it back. While it's possible to get a loan even with a low credit score, you usually need a strong score to get a loan with a low interest rate.

Getting the Best Rate

Most car lenders break customers into tiers by credit score. While the name for the top tier varies, being in it gets you the best interest rate. The exact score also varies, but a score of 720 or higher typically put you in a good position. As an example, a loan that would have a 3.21-percent interest rate if you have a 730 score might cost 4.56 percent if your score is 700, according to February 2014 data from Fair Isaac Corporation's MyFICO website.

Car Loans Without Great Scores

If you don't have a great credit score, you can usually still get a loan, but it will cost you more. MyFICO indicates that a loan that costs a borrower with a tier one score 3.21 percent, carries an interest rate of 15.64 percent for a borrower with a score around 600. The higher rate compensates the lender for the higher risk of lending to borrower without good credit. If you fall in this category, you might end up needing to purchase an inexpensive used car instead of a new one.

Other Options

One option that might help you get a car loan is to get a co-signer. When someone who is financially stronger than you co-signs with you, the lender can take the co-signer's income and credit score into account and may qualify you for a loan with lower interest or better terms. If you're in college or a recent graduate, some car companies also have new graduate programs that offer discounts and make it easier to qualify for a car loan.

Managing Your Credit Score

Before applying for a car loan, take good care of your credit. While everyone's situation varies, it's best to always pay your bills on time. The smaller the amount of your available credit you use, the better it is for your score, as well. Request your free annual credit report from to see what shows up. Address errors in your report immediately.