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Understanding What Credit Score You Need for a Car Loan

We can help you find the perfect vehicle for your needs and budget

When it comes to buying a vehicle, there are so many possibilities. However, before you make your choice, you should understand that your credit score plays a significant role in determining the loan amount you are eligible for, which can affect the final product you choose to purchase. If you plan to buy a new vehicle, you might wonder what credit score you need to secure a car loan. 

At Nusenda Credit Union, we take pride in advising car buyers to better understand their options - we will help you understand the minimum credit score you need to buy a car, the general income requirements for a car loan, and how a car loan can affect your credit. 

What should my credit score be for buying a car? 

The minimum credit score to buy a car will vary from one lender to another. Most lenders want potential borrowers to have a "good" credit score of 670 or higher. If your credit score is below this threshold, you may still be able to get a car loan, but you will likely have to pay higher interest rates and may be subject to stricter loan terms. The higher your credit score, the more favorable your lending terms - borrowers with higher credit scores regularly secure loans with lower rates and monthly payments. 

General income requirements for a car loan

Apart from your credit score, lenders also consider your income when you apply for a car loan. Typically, your monthly car loan payments should not exceed 10-15% of your net monthly income. For example, if you bring home $4,000 per month, your car loan payment should not exceed $400-$600. Total vehicle expenses, including registration and insurance, should be less than 20% of your net income. Saving for a larger down payment is a great way to lower your potential monthly payment. 

Does buying a car help your credit? 

Securing a car loan can help your credit in a few different ways: 


  • Payment history: Making timely payments on your car loan can improve your credit because it reflects a positive payment history. Lenders report your payment history to the three major credit bureaus, and their credit reports are used to calculate your credit score. 
  • Credit mix: Having a variety of credit types, such as a car loan and credit cards, can also help improve your credit score. If you do not have any installment loans (a loan with a fixed monthly payment), adding one to your credit report can help. It is also good to have a mix of installment and revolving credit (such as a credit card) with a good payment history to show you are responsible with credit. 

  • Credit utilization: Paying off your car loan can improve your credit utilization ratio, another factor affecting your credit score. 

Explore car loan options with Nusenda Credit Union

Understanding what credit score you need for a car loan is crucial when buying a car. By keeping your credit score in good shape, meeting income requirements, and exploring car loan options with Nusenda Credit Union, you can make the car-buying process a smooth and stress-free experience. 

If you are currently looking for an auto loan, Nusenda Credit Union is locally based with local processing, which means getting approved is quick and easy. We offer a variety of options to fit your needs, including flexible payment plans. With competitive rates, flexible terms, and a straightforward application process, we make it easy to explore your options. Contact us today to learn more about our car loan options.