What is the Minimum Credit Score for an Auto Loan?

August 6th, 2010 | Author:

Despite the fact that the economy is slowly recovering from the recent recession that was brought about by bad credit decisions, the credit requirements for most loans still remain tight. This means it will be very difficult to find car loans, let alone those with favorable interest rates if your credit score is below average. Therefore it is important to consider the minimum credit score for an auto loan before pushing through with the loan.

The credit score needed for an auto loan varies with each lender. However, a credit score in the range of 500 to 579 is generally considered bad credit because 500 is the average minimum credit score for an auto loan. It will be extremely difficult to find a bank, or a credit or financing company willing to lend you money for the loan. In rare cases, a car loan may be approved but it will surely be beyond favorable rates, often times even reaching the maximum interest rate legally allowed in the state.

It is highly discouraged to push through with the loan if you have the minimum credit score for an auto loan. Due to the very high amount a borrower will have to pay when choosing to push through with a car loan, it is advisable to choose a second hand car instead to save on interest payments. This will result to lower monthly payments which at first may seem insignificant but will really be a lot cheaper in the long run. Even still, a better choice will be to give up on planning for the car loan altogether until your score goes well beyond the credit score needed for an auto loan.

Meanwhile, having a credit score in the range of 580 to 619 will be considered minimal but fairly acceptable. It will be very unlikely that you will find a lender who can offer you a traditional loan with acceptable rates. In fact, just like having the minimum credit score for a car loan, there will still be a huge probability that the interest rates will be the maximum allowed by the state.

A borrower with a credit score above 620 will not have to worry about finding lenders who are willing to offer traditional loans with acceptable interest rates. Although the interest rate is still high compared to interest rates for credit scores above 700, this credit score is still the recommended credit score for people looking for car loans fast.

As a general rule, it should be remembered that a bad credit score will guarantee higher interest rates. This is true if your score is the minimum credit score for an auto loan. Likewise, choosing a longer payable period will result in a higher total payment. For optimum savings, it is recommended to postpone the car loan until your credit score reaches 620 and choosing a shorter paying period.

Newest Answers

The Basics of Budgeting

April 24th, 2017 | Author:
h

[W]hether you are just starting out on your own or just starting over, one of the most important things you can do is learn how to budget. Many people think they know how to budget, but they fail to stick with it. So, the goal is to not just create a budget, but to create […]

Continue Reading »

Revolving Credit or Installment Loans: Which is Better for Your Credit?

April 21st, 2017 | Author:
h

[I]f you’ve been learning about credit, one of the first things you’ll hear is you can’t get credit if you don’t have credit. It often seems to be a Catch-22; no one will give you credit so you can’t get established with a credit history so you can get new credit. With diligent effort, you […]

Continue Reading »

What to Do When a Landlord or Employer Asks to See Your Credit Report

April 19th, 2017 | Author:
h

[S]ometimes when you are filling out a rental or job application, you’ll come to a page that asks you to sign and authorize a credit check. Most people will sign it, hoping for the best if they have less than perfect credit. Even when you do sign it, you may wonder if that was the […]

Continue Reading »

Why Do Employers Look at Your Credit Report?

April 17th, 2017 | Author:
h

[I]f you’ve applied for a job, you may have been asked to provide authorization for the potential employer to look at your credit report. While you signed it just to be considered for the job, you may wonder why they need to know about your credit history. What are employers looking at when they review […]

Continue Reading »

Do Creditors Look Past Your Credit Score?

April 16th, 2017 | Author:
h

[Y]ou hear all about the minimum credit score needed to get a credit card or loan. It seems like this one magic number seals your fate. You wonder if creditors or lenders even look at the information in your credit report or if they just use that number to get a decision for your application. […]

Continue Reading »

What Creditors Look at on Credit Reports

April 14th, 2017 | Author:
h

[T]here’s a lot of information on a credit report. If you’ve ever requested a free copy of your credit report, you may have been overwhelmed at all of the stuff on there. It makes you wonder what creditors and lenders really look at. Do they read every line or do they skim? If they skim, […]

Continue Reading »

How a Credit Card Can Help You Build Credit

April 7th, 2017 | Author:
h

[A]fter the recession of 2008, more people have become conscious of debt. Some of them have decided to give up using credit cards or other forms of credit in favor of a cash-only approach. While this is a good idea for people with bad spending habits or those who have a tendency to live beyond […]

Continue Reading »