What credit score do you need for a car loan?

I want to purchase a new car, but I need a car loan. I’m worried that my 640 credit score isn’t good enough to be approved for financing. What does your credit score have to be to qualify for a loan?

A 640 credit score isn’t anything to be bashful about! It’s a near-prime score that typically translates into competitive interest rates. While you may not qualify for the very best APR a lender offers, your credit score is good enough that you shouldn’t get gouged on interest.
As of November 2021, the average car loan interest rate for someone with your credit score is 6.61% for new cars and 10.49% for used cars. However, your credit score is only a portion of what a lender will analyze to determine whether or not you’ll be approved for a loan and what interest rate you’ll be extended.
In addition to your credit score, lenders also consider:
  • If you have enough income to support a car loan
  • What your debt-to-income ratio is (aka your monthly debt obligations divided by your monthly pre-tax income)
  • The loan term you desire (e.g., the longer the term, the higher the interest rate)
  • The loan amount you require
If you have a debt-to-income ratio below 43%, good income, and a 640 credit score, you should have a decent chance of getting approved for a car loan at a decent rate.
But if you’re concerned about your credit, request your credit history and go over it in detail. Can you pay down some high-interest debt? Or pay back charge-offs? Or contest any errors? Doing so may help raise your credit score, and hopefully, earn you a better rate when applying for car loans.
Lastly, when buying a new car, don’t forget about car insurance. Lenders will require full coverage, which can get pricey if you fail to shop around.
Jerry can help. As a licensed insurance broker, Jerry allows you to compare quotes from over 50 top-rated insurers. Choose a policy and price that works for you, and Jerry takes care of the rest, securing your new plan and helping to cancel your old insurance—for free.
Eric Schad
Answered on Nov 09, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

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