How Your Credit Score Could Affect a Car Loan

Is there a connection between your credit score and your ability to get a car loan? What if you’re trying to buy a car even though your credit is less than perfect? Here’s what you need to know about credit scores and car loans.

First, the basics about credit scores. Your credit score is a 3-digit number that will fall between 300 and 850, with 850 being a perfect score. This number is calculated based on your financial history, which is comprised of factors like your ratio of debt to available credit; the length of your managed credit history; the number of credit types you’ve managed; your recent credit inquiries; and your bill payment history. You can get your credit score for free by contacting one of the 3 major credit bureaus—Equifax, Experian, and TransUnion.

For a more detailed breakdown of credit scoring, see our articles about Understanding Credit Scoring and Tips for Improving Your Credit.

How are credit scores and car loans connected?

Your credit score helps lenders determine whether it may be a risk for them to lend to you. A higher credit score indicates better reliability, since lenders are considering your past financial activity to be indicative of your future activity. As such, a lower credit score may mean you’ll be charged a higher interest rate for your car loan (we’re talking up to 20%). Does that mean there is a minimum credit score to get a car loan? Not necessarily. It will vary from lender to lender.

Can I still get a car loan with bad credit?

It’s certainly possible to figure out how to get a car loan if you have bad credit—you just need to go about it the right way. One of the best things you can do is partner with a specialized lender that is willing to work with customers who have bad credit. To find one, start with a bad credit auto loan direct lender like myAutoloan.com. This will allow you shop around and get multiple offers to find the right lender for your situation.

Want a full breakdown? Read our 5 Steps to Find a Car Loan with Bad Credit.