Can I Buy a Car With a 667 Credit Score
- A good credit score to buy a car is often above 660, as you're then considered a "prime" borrower.
- There's no industry-wide, official minimum credit score in order to qualify for an auto loan.
- Generally, the higher your credit score, the better terms you're likely to get on the loan.
- Read more of Insider's loan coverage here.
Americans are borrowing more money than ever to buy cars.
The average loan amount, not including interest, topped $35,000 for a new car and $23,000 for a used car in the second quarter of 2021, according to credit-reporting agency Experian. In total, Americans owe over $1.3 trillion on their auto loans.
These numbers may be less shocking when you consider the barrier to entry isn't incredibly high. While a good credit score to buy a car with a loan is usually above 660, according to Experian data, there's no industry-wide, official minimum.
As with most other types of loans, the higher the borrower's credit score, the better the loan terms. But, it's still possible to get an auto loan with a traditionally low credit score.
What are the different credit score tiers you can fall into?
According to Experian's analysis of auto loans in the second quarter of 2021, borrowers who received financing for a new car had an average credit score of 732, while borrowers who received financing for a used car had an average credit score of 665.
In its analysis of auto loans, Experian separates current auto-loan borrowers into five categories based on credit scores:
- Super prime (781-850)
- Prime (661-780)
- Nonprime (601-660)
- Subprime (501-600)
- Deep subprime (300-500)
Borrowers in the subprime and deep subprime categories represent just under 18% of all borrowers in the auto-loan market, according to Experian. Meanwhile, borrowers in the top two categories, super prime and prime, represent about 65% of all borrowers.
What is a good credit score to buy a car?
Generally, the higher the credit score, the lower the interest rate. According to Experian's second quarter data, the average interest rates on a new car loan for each category of borrower were as follows:
Interest rates tend to be even higher for used car loans, reaching 17.11% for subprime borrowers and 20.58% for deep subprime borrowers.
Some auto lenders may also require a cosigner for those with lower credit scores. A cosigner is somebody with established credit who legally agrees to take responsibility of paying back the loan if the primary borrower fails to do so.
What other credit-scoring models do lenders use?
When deciding whether to extend a loan, auto lenders may use a specific Fair Issac Corporation (FICO) credit-scoring model called the FICO Auto Score. The FICO Auto Score is a variation on the general scoring model, designed specifically to predict the risk of a borrower defaulting on car payments. It ranges from 250 to 900, according to Experian.
Many auto lenders will consider more than a credit score, though. A borrower's debt-to-income ratio, full credit history, and down payment amount will also affect the terms of the loan.
Tanza Loudenback
Correspondent, Personal Finance Insider
Tanza is a CERTIFIED FINANCIAL PLANNER™ and former correspondent for Personal Finance Insider. She broke down personal finance news and wrote about taxes, investing, retirement, wealth building, and debt management. She helmed a biweekly newsletter and a column answering reader questions about money. Tanza is the author of two ebooks, A Guide to Financial Planners and "The One-Month Plan to Master your Money." In 2020, Tanza was the editorial lead on Master Your Money, a yearlong original series providing financial tools, advice, and inspiration to millennials. Tanza joined Business Insider in June 2015 and is an alumna of Elon University, where she studied journalism and Italian. She is based in Los Angeles.
Ryan Wangman
Junior Loans Reporter
Ryan Wangman is a junior reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe. Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services here >>
Disclosure: This post may highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team. Read our editorial standards.
Can I Buy a Car With a 667 Credit Score
Source: https://www.businessinsider.com/personal-finance/what-is-a-good-credit-score-to-buy-a-car
0 Response to "Can I Buy a Car With a 667 Credit Score"
Post a Comment