Used Car Loan Interest Rates Based On Credit Score – You shopped for cars, went on test drives and found the perfect vehicle. But will you qualify for a car loan? Before you are approved, the lender pulls your credit report to determine your creditworthiness. Your credit report and credit score help them decide whether to give you a loan and at what interest rate.

Lenders can choose between many credit scoring models and multiple credit bureaus. So what kind of credit score do car dealers typically use?

Used Car Loan Interest Rates Based On Credit Score

When you apply for an auto loan, a lender will likely use one version of the following credit scores: FICO® Auto Score, Base FICO® Score, or VantageScore®. FICO® scores are used by 90% of major lenders and VantageScore® credit scores are used by nine of the 10 largest banks.[1][2]

What Is A Good Interest Rate On A Car Loan?

FICO® Auto Scores are industry-specific scores that focus on how likely you are to pay back an auto loan late. For example, late payments (or other negative information) on past auto loans could hurt your FICO® auto score more than other derogatory items.

Instead of the traditional 300-850 credit score range, FICO® Auto Scores presents a scale of 250-900. A higher FICO® Auto Score indicates less credit risk – just as a higher score means less risk according to other credit scoring models. With a higher score, you’re more likely to qualify for auto financing and get a better interest rate based on each auto lender’s criteria. Each individual lender also determines what other financial information they will consider in their credit review process.

Lenders use several versions of the FICO® Auto Score. (Think about the many versions of a smartphone, and how some users will upgrade their operating systems while others continue to use older options.)

The latest version (at this writing) is FICO® Auto Score 10, launched in 2020. However, many auto lenders still use FICO® Auto Score 2, FICO® Auto Score 4, FICO® Auto Score 5, and FICO® Auto Score. 8.

What’s The Minimum Credit Score For A Car Loan?

Basic FICO® scores predict the likelihood that you will make a late payment on any credit obligation within the next 24 months. They present the traditional score range of 300-850.

Lenders use many versions of basic FICO® Scores. FICO® Score 10 is the most recent (as of this writing). However, FICO® Score 8, introduced in 2009, remains the most widely used version.[3]

In 2006, a new credit scoring option became available – VantageScore®. The VantageScore® credit score was born from a collaboration between the three major credit agencies.

The two most recent versions of the VantageScore® credit score (3.0 and 4.0) feature the industry standard credit score range of 300-850. Older VantageScore® models had a scale of 501–990.[4]

Used Car Interest Rates Store

VantageScore® is becoming increasingly popular among auto lenders. The 2019 VantageScore® Market Study Report revealed that auto lenders used nearly 131 million VantageScore® credit scores between July 1, 2018 and June 30, 2019.[5]

Your credit score varies depending on the credit scoring model and credit bureau. Various companies will disclose credit scores to you, often for a fee. For example, you can get your FICO® Score 8 for free from Experian, or your VantageScore® 3.0 for $7.95. Equifax will reveal your FICO® Score 5 on its report for $14.95 per month, and TransUnion will share your VantageScore® 3.0 on its report for $24.95 per month.[6] VantageScore provides free credit score reports from certain providers as well.[7]

FICO® offers an “advanced” plan that provides 28 FICO® Scores, including auto, mortgage and credit versions, as well as a tri-bureau credit report and other services for $29.95 per month.[8] FICO® also offers other plans, so be sure to check the pricing page to determine the best option for you if you believe you need the service. You can also request a free copy of your credit report at every 12 months from any credit reporting company.[9]

Even if you don’t know which model your lender uses, it’s important to understand roughly what your credit score is and how that will affect your interest rate.

Why It May Be Smart To Pay Off Your Car Loan Early

There are three major credit bureaus that compile your credit history into credit reports: Equifax, Experian and TransUnion. Lenders can use any credit bureau to determine your loan eligibility.

There is no definitive answer as to which credit bureau is most used for car loans and it could vary based on several different factors as to how each lender reports to each credit bureau. While most do, lenders are also not required to report to each credit bureau, which may mean that there is no guarantee that your credit information will be the same across all three credit bureaus.[10]

Lenders will look at your credit score to help determine whether to approve a car loan application, but it’s not the only factor. They will also consider your debt-to-income ratio; personal information such as how long you have been at your current address or working for your current employer; and the size of the down payment you are willing to make.[11]

You may still be able to buy a new car with bad credit, but if you are approved, the above factors will likely affect your loan terms, the size of your monthly payment, and your interest rate. Remember to keep an eye on your budget and evaluate used car options. While a luxury car may look attractive, a functional used model may be a better fit for your budget and credit rating.[12]

Loan Vs. Line Of Credit: What’s The Difference?

According to the Consumer Financial Protection Bureau (CFPB), your credit score is one of many other factors that can affect your interest rate. Your interest rate can vary based on your credit history, the loan amount, the type of car you are buying, and the length of the loan.[13]

If you are in the “fair” or “very poor” credit score range, you may want to try to increase your score before applying for a car loan. Borrowers with fair credit may be considered subprime borrowers and are unlikely to get the best terms if their loan is approved. Those with very bad credit may be denied altogether or may face high loan rates and additional fees even if they are even approved.

This chart details the average interest rate by credit score for a new or used car loan. You can see that it classifies borrowers into five risk categories based on their credit score: deep subprime, subprime, non-prime, prime or super-prime, according to Experian’s latest data for Q4 2021.[14]

Disclaimer: All rates are subject to change and lenders may have different categories and scoring models. Please use this strictly as a guide.

Auto Loan Interest Rates Are Skyrocketing. No One Told Credit Unions.

A lender may see a borrower with a low credit score as a higher risk and may ask for a higher down payment. This can work to your advantage though, as you will have a smaller loan to pay off. If you can afford a large down payment, you may be able to save some money by paying less interest overall, even at a higher rate.

Before you decide to buy a car, it’s helpful to understand the factors that go into calculating your credit score. You can then tailor your financial activity to help you build credit.

Your payment history is the most important factor in your credit score, making up 35% of your FICO® Score. Making loan payments on time — whether they’re personal loans, student loans, or credit card payments — is an important step in boosting your credit score.

Your credit utilization ratio is the second largest factor in calculating your FICO® Score, accounting for 30%. This is the amount of credit card debt you have on all of your credit cards divided by their combined credit limit.

Interest Rates: What You Need To Know In Philadelphia

If you had $2,000 in debt on three credit cards with a total limit of $5,000, your credit utilization would be 40%; experts suggest keeping it below 30%. Having a higher credit utilization can negatively affect your credit score and lenders may see you as a potential risky borrower.[15]

Errors occur on credit reports more often than you might think. Numbers can be transposed; accounts may be incorrectly reported as open, late or delinquent; balances can be disabled; and fraud may occur. One FTC study found that 1 in 4 consumers found errors on their credit reports that could affect their score.[16]

Fortunately, you can dispute any errors that are inaccurate. To check for any suspicious entries, you can order a free copy of your credit report at

Applying for new loans or new credit can affect your credit score. When you apply for new credit, one of the three major credit bureaus will run an inquiry on your credit report. Depending on which bureau the lender uses, and the other factors on your report, this survey can lower your score by a few points. However, according to FICO®, if you apply for multiple auto loans within a short period (usually 45 days) it will count as just one hard inquiry; this principle also applies to shopping for a mortgage loan.[17]

What You Need To Know About Vehicle Loan Rates

If you think you’ll be in the market for a car, it’s a good idea to build your credit beforehand. Focusing on general credit habits can be more helpful than trying to achieve a specific score. Building credit takes time, so be patient and

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