Credit Score Needed to Buy a Car

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Even with poor credit.

By

Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - August 31, 2020

When it comes to what credit score you need to purchase a vehicle, it can depend on what lender you choose to work with.

Credit Score Requirements and Auto Loans

There isn’t a hard-and-fast rule when it comes to what credit score you need to finance a car. It’s simply because lenders vary. There are some that may deny you for financing because of just your low credit score, while others may consider other factors besides your credit. Some lenders may not even check your credit reports at all when you apply for financing.

Different types of lenders assist people in different credit score ranges. The most common are direct lenders, subprime lenders, and BHPH dealers. Before we get into how each type of lender can work with you, let's look at the credit score ranges you might fall into according to Experian.

Credit Score Ranges:

  • Super prime: 781-850
  • Prime: 661-780
  • Nonprime: 601-660
  • Subprime: 501-600
  • Deep subprime: 300-500

If you're not sure where yours stands, get your credit score online from our trusted partner.

If you have a lower credit score, such as a score in the subprime or deep subprime range, a direct lender from a bank may not approve you. We’re not saying it’s impossible, and it could be well worth it to try with them first.

However, borrowers with less than perfect credit are likely to have a better chance of getting approved for auto financing with bad credit lenders. While subprime lenders and BHPH dealerships both can work with bad credit, there are some big differences between the options.

We cover some basic requirements for these car loan options for the different lending types. Remember, everyone’s situation varies and your credit score is just one piece of the auto loan puzzle.

1. Direct Lenders

Direct lenders are those from banks, credit unions, and some online lenders. They give you the option to get pre-approved and then shop for a vehicle like a cash buyer. These lenders give you a maximum amount that you can borrow, and knowing that, you can purchase a car from a private seller or dealership.

However, they typically prefer borrowers with good credit scores. If your credit is too low, it could be an instant denial. You may have a fighting chance with bad credit if you apply with your own credit union.

Credit unions are member-owned and may be a little more lenient on their credit score requirements. However, with a lower credit score, you should expect to be asked to provide a down payment.

New borrowers should try their own financial intuitions for auto financing first. First-time buyers usually have lower credit scores due to a thin credit file, but some direct lenders may be more understanding of a borrower in this position. If a direct lender can’t help your no credit or bad credit situation, a subprime lender may be for you.

2. Subprime Lenders

Subprime lenders are third-party lenders that are signed up with special finance dealers. You never actually meet with the lender themselves; instead, you go through the lending process with the special finance manager at the dealership.

These lenders specialize in working with borrowers with poor credit scores. Generally, a credit score below 660 is considered “subprime,” which is where subprime lenders get their name.

Your credit score isn’t the only thing that’s considered during the approval process, though. In fact, they look at multiple aspects of your financial health to gauge your ability to pay for a car loan.

Expect a subprime lender to ask you to provide:

  • Computer-generated check stubs
  • A recent utility bill or bank statement
  • Your valid driver’s license
  • A recent contract cell phone or landline phone bill
  • A down payment of at least $1,000 or 10% of the vehicle’s selling price
  • A list of personal references with complete contact information

Once you’ve submitted all your information and documents, the lender looks it over and sees if you’re qualified for financing. If you are, you’re told what your maximum car payment can be. From there, you choose a vehicle from the dealer’s lot that fits your needs and the payment.

Subprime lenders report their auto loans to the major credit bureaus, which means it’s a chance for credit repair. If you stay current on your car payments, and keep track of the other aspects of your credit score, you can work to put your credit in the prime or super prime range in due time.

Subprime auto loans are often a choice for borrowers who were just discharged from bankruptcy, new borrowers, or borrowers with credit reports that have some damage. If your credit reports are really questionable, a different kind of bad credit dealership, called a buy here pay here (BHPH) lot, may be a good route to explore.

3. Buy Here Pay Here Dealers

BHPH dealerships are a different kind of lender. They use what’s called in-house financing, so the dealer is actually your lender, too! You shop for a vehicle with them, and then you do all the financing and lending processes with them. It’s a convenient setup, and you may even be able to drive off with a car the same day you walked in.

BHPH dealerships are known for not checking credit scores at all. They don’t have to rely on a third-party lender to review your credit reports and then approve you for financing. However, just because there may not be a credit check doesn’t mean that anyone can be approved.

Expect the BHPH dealer to ask for a down payment, sometimes of around 20% of the vehicle’s selling price. You also need your check stubs to prove you make a qualifying income. With or without a credit check, dealerships still want to know that you can pay for the auto loan.

Something to consider with BHPH dealers is that they may not report your on-time payments to the credit bureaus. On the flip side, these used car lots can work with borrowers in bad credit situations that other lenders can’t.

For example: direct lenders and subprime lenders usually don’t consider a borrower for financing if they have a vehicle repossession on their credit reports that’s less than a year old. BHPH dealerships don’t usually review credit reports, though, so the recent repo wouldn’t be a factor in the approval process.

Ready to Take the Next Step?

Remember that everyone’s individual situation also varies, and your credit score is just one piece of the auto financing puzzle. Now that you know what options you have at your disposal, you can begin the search for a dealer that can fit your credit needs. Don’t know where to start looking? While we’ve got you here, why not start with us at CarsDirect?

We have a nationwide network of dealerships that we’ve built up over the last 20 years, and we know which dealers are signed up with bad credit lenders. To get matched to a dealership near you with the lending resources you need, fill out our free car loan request form. It’s secure, quick, and there’s never a cost or obligation to buy anything. Let’s get to work!

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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