What’s a Good Credit Score for a Car Loan?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - November 18, 2019

According to FICO, a “good” credit score is usually a score of at least 700. Auto lenders generally like to see that you have good credit, but there are lenders that finance consumers with credit scores below 700. There is a minimum credit score required for a car loan, but it varies from lender to lender. Having a low score affects your ability to get approved. If you’re wondering what makes up your credit score and how you can improve it, keep reading.

What Affects Your FICO Score?

You need to know what factors affect your credit score before you get started on building and repairing it. According to FICO, there are five categories that make up your credit score. Note that each of them is weighted differently:

  1. Payment history: 35% – This is the most important factor that affects your credit score. It’s important that you pay all your bills on time each month. If you don’t, your credit score is sure to drop quickly.
  2. Amounts owed: 30% – The second next important factor is amounts owed. The less debt you have, the higher your score is likely to be. Ideally, you should keep your credit card balances below 30% of your available credit card limits to keep your score in good shape.
  3. Length of credit history: 15% – This category focuses on how long you’ve had your credit accounts, how often you use them, and the average age of all of them. A shorter credit history can affect your score, but it isn’t as big of a factor compared to amounts owed or your payment history.
  4. Credit mix: 10% – How many different lines of credit do you have and use? Lenders like to see a mix of installment credit (loans, mortgage) and revolving credit (credit cards) accounts. It shows that you know how to handle both types of credit.
  5. New credit: 10% – This may sound counterintuitive, but opening new lines of credit can actually help boost your credit score as long as you manage them responsibly. Be cautious, though, because opening too many credit accounts in a short period of time is seen as a red flag for lenders.

A common misconception is that additional factors such as your age, gender, income, and job affect your credit score. This simply isn’t true – your FICO score is based on your spending and payment habits, and your personal information isn't considered.

How to Improve Your Credit Score for a Car Loan

Now that you understand what determines your FICO credit score, what steps should you take to improve it so you can get a good interest rate on an auto loan? Your credit score isn’t going to improve overnight, and depending on where you start, it could take many months before you reach the “good” range.

Here are three ways you can build your credit score:

  1. Become an authorized user – If you have a close friend or family member that’s willing to add you as an authorized user to their credit card account, you should take advantage of the offer. This is a great way to build credit quickly. You’re added to the person’s credit card account and get the benefits of its payment history and on-time payments going forward.
  2. Apply for a credit card – You can apply for a traditional credit card, secured credit card, or even a store card. All three help you improve your credit score over time as long as the account is managed responsibly.
  3. Take out a credit-builder loan – A credit-builder loan is a type of personal loan that establishes an account that you make monthly payments into. This gives you an opportunity to build your credit score through regular, on-time loan payments. Once you’ve completed the terms of the loan, you can withdraw the total, plus interest, and the money is yours to keep.

If you would like to monitor your credit score and reports, our trusted partner can assist you.

Looking for a Bad Credit Auto Loan?

Improving and building credit is important, especially if you’re looking to apply for a car loan. However, you don’t have to have great credit to qualify for an auto loan. There are many lenders that work with credit-challenged consumers, and we can help you find them.

At CarsDirect, we help people find local dealerships that work with lenders that understand and work with a wide range of credit issues. Don't wait any longer, just fill out our easy and free car loan request form today, and we'll get started matching you to a special finance dealer in your area!


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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