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What credit score do you need to buy a car?

05 July 2023Isabelle Coetzee 7 min read
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Buying a car is an exciting step, but it is also essential to consider all your financial commitments before you make your choice. One of the most significant factors is your credit score, which impacts the interest rate you'll receive on a car loan. Let’s explore what to consider to make your new ride as smooth as possible.

To understand what score you need to buy a car, it is important to understand what a credit score is. A credit score is a numerical representation of your creditworthiness. It's calculated using information from your credit history and takes the form of a credit report that shows your borrowing and payment habits. Your credit score is critical when you try to get different financial products and benefits - such as credit cards, loans, and home loans.

But what credit score do you need to buy a car? The answer depends on the lender and the type of car you're interested in purchasing. However, the higher your credit score, the better your chances of securing a better interest rate and terms on your car loan. As such, it's advisable to maintain a good credit score to enjoy various financial benefits, including lower interest rates on car loans. You can check your credit score online for free through ClearScore.

A piece of information any aspiring car buyer needs to be aware of is their credit score. Your credit score is a factor that determines if you’ll qualify for a car loan. While many factors determine your creditworthiness, most car dealers have a minimum credit score requirement before they consider giving you a loan.

While the minimum score can change depending on the dealership and the make and model of the car you are interested in, a score of at least 600 or higher is usually needed to get a car loan. However, it's good to remember that a low credit score doesn't automatically rule you out, and options are available if you have a lower credit score.

The relationship between credit scores, car loans, and interest rates is valuable to understand for anyone looking to buy a car. The concept is quite simple: the higher your credit score is, the more likely you are to get approved for a car loan, and the lower the interest rate will be. In short, credit scores act as a measure of risk for lenders. A good credit score can show lenders that you’re a responsible borrower who is likely to make on-time payments.

So, what credit score do you need to buy a car? While there is no hard and fast rule, a “good” credit score usually falls between 680 and 739; however, even if your score is lower, you can still get approved for a car loan, albeit with a higher interest rate. Usually, interest rates for second-hand cars can be higher than those for new cars.

This is because used cars depreciate more quickly, making them riskier investments for lenders. In any case, if you’re considering buying a car, it’s good to keep your credit score in mind and take steps to improve it if necessary.

A low credit score can make it difficult to accomplish many financial goals, such as buying a car. Firstly, it's valuable to find out your actual credit score and if there are any negative factors impacting it. Then, consider improving your score before applying for a car loan.

1. Check your credit report for errors

You can check your credit report for errors if you’re trying to improve your credit score.  If you find an error, you can dispute it with the credit bureau and have it removed from your report. It could help to improve your credit score. To detect and resolve these inaccuracies, access your credit report and raise a dispute outlining the issues through the help section on our website. You can find more details on our FAQ page.

2. Make all of your payments on time

Another good thing you can do to improve your credit score is to make your payments on time. This includes your home loan, car loan, credit card payments, etc. Payment history is one of the most significant factors in determining your credit score, so it’s good to always make payments on time.

3. Reduce your debt-to-income ratio

Your debt-to-income ratio is the amount of debt you have compared to your income. Lenders use this ratio to decide how much of a risk you are when repaying a loan. A lower debt-to-income ratio will improve your chances of getting approved for a loan and can also help to improve your credit score. You can reduce your debt-to-income ratio by paying off some debts, managing your finances better, or increasing your income.

4. Use a secured credit card

If you have bad credit, one way to improve your credit score is to use a secured credit card. A secured credit card is a type of credit card that requires you to put down a security deposit before you can use it. The deposit acts as collateral if you default on the card, which means the issuer is less likely to lose money if you don’t make your payments. Because of this, secured cards are easier to get approved for than unsecured cards. Additionally, responsible use of a secured card could help improve your credit score over time.

5. Become an authorised user on someone else’s account

If you know someone with good credit, you can become an authorised user of their account. Your shared payment history gets reported on your credit report, which can help improve your credit score.

Low credit scores can make it hard to buy a car. However, it’s not impossible. The first step is to know what credit score you’ll need to qualify for a car loan. Generally, a credit score of 660 or above is good enough to secure a car loan, but the required score can change depending on the lender. You can consider these options if you’re struggling to get a car loan with a low credit score.

1. Provide a bigger down payment/deposit

There is a way to increase your chances of being approved for a car loan despite a low credit score – by providing a larger deposit. By providing a larger deposit, you show the lender that you’re serious about repaying the loan and are willing to put in the effort to make it happen. While it may be a big financial commitment upfront, it can ultimately save you money in the long run by helping you secure a car loan with better terms and interest rates. Increasing your deposit can improve your chances of getting approved for a car loan.

2. Provide additional documents that prove your financial stability

Try giving your lender additional documents such as bank statements, pay stubs, and tax returns to show that despite a low credit score - you can still make regular payments on the loan. It’s good to research what credit score you may need to buy a car from different lenders, as criteria may differ. By being proactive and providing the necessary information, you can increase your chances of approval for a car loan, even with a low credit score.

3. Apply for a car loan with a co-signer

Try to apply for a car loan with a co-signer. It means that someone with a good credit score will back you and take shared responsibility for the loan. Lenders typically require a credit score of at least 660 to qualify for a car loan. However, with a co-signer, you may be able to secure a loan even if your credit score falls below this number. Remember that you and your co-signer will be responsible for repaying the loan, so it's crucial to accept a loan you can afford. By working with a co-signer, you can obtain a car loan and start rebuilding your credit while enjoying the benefits of owning a car.

4. Choose a car that meets your practical and financial needs

When applying for a car loan with a low credit score, choose a car that meets your practical and financial needs. Your credit score heavily impacts the interest rate given on your loan, so opting for a vehicle that is within your budget can make a big difference in the long run. However, those with lower scores can still qualify for loans but can expect to pay higher interest rates. So, it's imperative to consider the overall cost of the car, including the interest rate, to ensure it's a feasible option for your financial situation and improve your chances of having the loan approved.

5. Shop around for car finance

If you have a low credit score, you can still shop for loan options and find one that works for you. Be sure to compare interest rates and terms from multiple lenders before deciding. You may secure a loan to get the car you need while rebuilding your credit.

Taking out a car loan can help improve your credit score, but it depends on how responsibly you manage the loan. Cars are expensive, and very few can afford them with cash. It’s where car loans come in handy, allowing you to buy a car without putting a significant dent in your finances. When you make monthly payments on time and manage your debt-to-income ratio successfully, lenders see you as a reliable borrower -  and could reward you with better interest rates and credit scores. However, before you take out a car loan, you’ll need to know what credit score is required to qualify. Typically, lenders require a score of at least 660 for a car loan, so it's crucial to improve your credit score; if you don't meet that minimum threshold. Overall, responsibly managing a car loan can be a valuable tool to help you build your credit score.


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Written by Isabelle Coetzee

Freelance Copywriter

Isabelle is a freelance finance writer and journalist in Cape Town. She helps make managing your personal finances calm, clear and easy to understand.