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A car is a major purchase, and most Americans don’t have the cash on hand to buy one outright. That’s why so many people use an auto loan. In fact, according to Experian’s State of the Automotive Finance Market report, buyers used auto loans for almost 80% of new vehicle purchases and just over 40% of used vehicle purchases in Q1 2023.
When you apply for a car loan, the lender will run a credit check to determine whether or not to approve the loan. But which credit score is used for car loans? The answer is complicated and can vary from lender to lender.
What is the difference in credit scores?
There are two main credit-scoring models that lenders use: FICO score and VantageScore. When it comes to car loans, it’s up to the lender’s discretion which one they choose—and in some cases, the lender might check your credit using both scoring models.
Both models use information from one of the three major credit bureaus (Equifax, Experian, and Transunion) to come up with their scores, which typically range from 300 to 850. However, FICO also has some industry-specific scores, including one for auto lenders. These lenders may choose to use the FICO auto score when considering a loan application.
What is a FICO auto score?
A FICO auto score is a credit score calculated specifically to determine the likelihood that a borrower will repay a car loan as promised. FICO auto scores can range from 250 to 900.
The score is based on a generic FICO score, but there’s a little more emphasis placed on your past history with auto loans. If you’ve paid off previous auto loans with no problems, you’ll likely have a higher FICO auto score. But if you have defaulted on an auto loan or been repeatedly late with payments, you may find your score is lower than you think.
How to check your FICO auto score
Checking your FICO auto score is a little more complicated than checking your other credit scores. You can access your regular FICO score fairly easily and for free—many banks offer this as a service for customers, or you can sign up for a credit monitoring service to access your score information.
To check your FICO auto score, however, you’ll need a paid subscription to a credit-monitoring service. Some examples include myFICO and Experian. A subscription to FICO will let you check all your FICO scores, including for auto loans and mortgages. It might not be worth paying for a subscription if you’re only interested in knowing your FICO auto score, especially since there’s no guarantee the lender you choose will use this score. However, a subscription also offers perks such as identity theft insurance and identity monitoring, which may make it worth the cost to some.
MyFico credit score
MyFico credit score
Experian CreditWorks℠
Experian CreditWorks℠
Similarly, you’ll need a paid subscription to Experian to see your FICO auto score. Other features include subscription cancellation services, bill negotiation services, identity protection, and identity theft insurance. Again, it may not be worth paying for a subscription if all you want is to see your FICO auto score, but you might find a subscription worth it for the other benefits it offers.
Better credit means lower costs
| Credit score range | Average APR for a new car loan | Average APR for a used car loan |
|---|---|---|
781-850 (super prime) | 5.18% | 6.79% |
661-780 (prime) | 6.40% | 8.75% |
601-660 (nonprime) | 8.86% | 13.28% |
501-600 (subprime) | 11.53% | 18.55% |
300-500 (deep subprime) | 14.08% | 21.32% |
Which credit score is used when buying a car?
Each lender determines which credit score they will use when considering an application for a car loan. That makes it impossible to predict which model will be used when you apply for a car loan. You can always ask the lender which credit score they use as part of the credit check process, but they’re not obligated to tell you.
Ways to improve your credit score before buying a car
If you’re planning to buy a car in the near future, it’s smart to check your credit score first so you can gauge how easy it will be to get a loan. If it’s lower than you thought it was, the following tips can help you build a better score before you apply for a car loan:
Pay down balances
If you have several credit cards with high balances, it’s a good idea to start paying them down before applying for a car loan. Using more than 30% of your total available credit can have a negative impact on your credit score.
Consolidate debt
Consolidating debt is a common way to reduce interest payments and pay down debt faster. Rather than paying off balances on several credit cards with varying interest rates, you can consolidate your debt to one loan or card, possibly with a lower interest rate.
Pay bills on time
The easiest way to boost your credit score is to pay bills on time. If you’re frequently late paying bills, you’ll see your credit score drop quickly. An easy way to make sure you’re paying your bills on time is to sign up for automatic bill payments whenever possible. For bills that don’t offer this, set reminders to ensure you’re making payments on time.
Avoid applying for other loans or credit cards
When you apply for a loan or line of credit, the lender will run a hard credit check, which will negatively affect your credit by a few points. Applying for several loans or credit cards close together will have a more noticeable effect on your credit score, and it can also make you seem more risky to lenders. In general, it’s best to hold off on new loan or credit card applications before applying for a car loan.
Monitor your credit score
Monitoring your credit score can help you identify any issues as soon as they arise. It can also be a motivator if you’re actively working on boosting your credit score, since you’ll be able to see the positive changes happening in real time. There are several credit monitoring services available, including Experian and myFICO, that can help you keep a close eye on your credit.
Additional factors that can help you qualify for a car loan
Your credit score is important if you’re planning to finance a car purchase using an auto loan. But there are other factors that could help you qualify for a car loan, including the following:
- Increase your down payment: Putting a larger sum down on your car purchase means you’ll need to borrow less. This could make it easier to get loan approval, especially if you have a subprime credit score.
- Prove your reliability: Your credit score shows lenders how responsible you are with your finances, but it doesn’t show facts such as the length of time you’ve worked for your employer or lived at your current residence. Bringing documents that prove these facts to a lender can help show them that you have stable employment and housing, which can make you seem more reliable.
- Shop around for financing: Before heading to the dealership to buy a car, check and see whether you can get a loan from your current financial institution. They might offer a better rate than the dealer’s financing offers. You can bring your loan preapproval letter to the dealership and see if they can beat your bank’s rates.
TIME Stamp: Different lenders use different credit scores for car loans
While it’s possible a lender will use the FICO auto score when checking your credit for a loan, there’s no guarantee. Lenders can use whichever score they choose, which could be your basic FICO score, your FICO auto score, or your VantageScore. Knowing your credit scores can help manage your expectations when applying for a car loan—and having a plan to boost your score before buying a car can help you qualify for better rates.
Frequently asked questions (FAQs)
Whose credit score is used when buying a car with a cosigner?
When you apply for a car loan with a cosigner, the lender will use both applicants’ credit scores as part of the application process. If your credit score is on the low end, having a cosigner with a super prime credit score could qualify you for a lower rate.
Can you cosign a car with a 650 credit score?
The requirements for a cosigner can vary between lenders, but in general, a cosigner will need a credit score of at least 670, which falls in the very good to excellent range.
Can I buy a new car with a 530 credit score?
Each lender has different requirements when it comes to minimum credit scores for an auto loan. A 530 score is considered subprime, and some lenders will not approve a car loan for a borrower with this score. However, there are plenty of lenders who will—you’ll just end up with a much higher interest rate than you would if you had a healthier credit score.
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