By Anthony Santiago - Editor-in-Chief

July 26, 2023

Are you worried about your low credit score and wondering if you can buy a car with bad credit?

Bad credit refers to a low credit score, usually below 630. This results from a history of missed payments, very high credit utilization, or the need for better credit history altogether.

It is important to understand that credit scores are calculated based on various factors, including payment history, credit utilization, length of credit history, types of credit, and new credit applications. Your credit score will determine your financing options and chances of approval.

Despite bad credit scores, you can get approved for financing.

However, if your credit score falls below 630, you may face more challenges when obtaining a loan. Bad credit impacts your purchasing power, especially if you have a late payment history. This is the most common cause for lower scores.

In addition, several factors can contribute to your bad credit, such as high credit card balances, bankruptcy, foreclosure, or judgments against you. Lenders consider these negative factors and will impact your creditworthiness, making it more difficult to secure a car loan.

When I had bad credit, the interest rates were a bit high, but that is the price you will pay to get behind the wheel and buy a new car. I'll dive into what you can do immediately to help get you in the right direction.

So, to quickly answer the question: "Can you Buy a Car with Bad Credit?"

Yes, you can buy a car with bad credit, but I suggest holding off for 6 months to allow some time to increase your score. You can start right now by making your payments on time.

I understand that 6 months seems like a long time, but having the ability to purchase at a lower interest rate is better for you in the long run and for your credit rating.

Key Takeaways

  • Bad credit affects car buying: Bad credit can make it difficult to secure car financing. Having a high credit utilization is a negative factor.
  • Options for buying with a bad or poor credit score. There are Subprime lenders, buy here pay here dealerships, secured loans, and co-signers who can provide alternative ways to purchase a car with bad credit.
  • Tips for buying with bad credit: Improving your credit score, saving for a down payment, getting pre-approved for a loan, and finding a co-signer can help make it happen.
  • Despite these challenges, options are available for buying a car with bad credit. Interest rates might be high, but lenders are hedging that you might default on payments.

    This is especially true for Subprime lenders who specialize in working with individuals with lower credit scores and may be more willing to approve loans.

    Buy Here Pay Here dealerships offer in-house financing and may be more lenient with credit requirements. Secured loans are another option, where collateral such as a vehicle or other asset is used to secure the loan. Finally, having a co-signer with good credit can significantly increase your chances of securing financing.

    The next question is SHOULD you buy a car with bad credit?

    I get need a car now! But learn why waiting might be your best option.

    However, before you start signing the papers for your car loan, it would help if you considered a few things.

    • Do you have enough for a down payment?
    • Do you have enough for future repairs and insurance?
    • Do you have enough to cover fuel and gasoline?
    • If you are looking for an EV, does your place have a charger or charging station?

    Remember, ownership doesn't just stop after you drive off the lot. There are some models and makes that are more reliable than others. Vehicle maintenance is an important consideration and can add to your monthly expenses.

    For example, Toyota and Honda score high and have higher residual values. If you are looking at German brands, you may be in for some sticker shock if you plan to get it serviced by the dealer. BMW, Audi, and Mercedes Benz usually carry high labor rates, but as long as you anticipate it, it can be a rewarding experience. Repair bills can quickly add up to thousands of dollars.

    Let's get into your Credit Score or FICO score….

    What is a Good Credit Score?

    For a car loan, a good and excellent credit score is 700 – 850. A high credit score indicates that you pay your bills on time and responsibly, use credit cards wisely, and have an excellent history of keeping up with your debts and balance due dates.

    A credit bureau will consider your on-time payments, credit utilization ratio, soft credit inquiries, and how long your accounts are open to determine if you qualify for excellent credit. I will cover the various credit tiers later on.

    You won't be reading this article if you fall into this category. There are a few things that you can easily do to help improve your score:

    • First, pay your bills on time or at least avoid any late payments on your accounts.
    • Pay down some of your smaller balances in full. This will help clear out your debt to the ratio. You want to reduce debt utilization as much as possible.
    • Stop buying stuff that you don't need.

    Poor credit is not a death sentence. You can do it. I have gotten my score up, and you can too. There are various loans for people with different credit tiers.

    The Truth About Your Credit Utilization

    To learn more about how to improve your credit score, check out this article by Investopedia. As a result, it's important to understand how your credit score works.

    Remember, the key is to have a low credit utilization overall. However, you do not want to open new accounts to increase your credit limit. What you want to do is handle your current debt responsibly. You should aim for a credit utilization of 30% or lower.

    The key here is the lower, the better. A trick that you can try is to increase your credit limit. Call your credit card company to see if they can increase your limit by $10,000. Remember, while your limit increases, you still need the green light to spend more.

    What Exactly is Poor Credit?

    A bad credit score falls below 630. To get a good credit score, you need to maintain it above 750 as an average credit score. Remember, a low credit score puts you at a disadvantage in the eye of banks and lenders.

    There are many credit situations, but if you have bad credit, you may need help applying for a car loan, mortgage, or credit card.

    Approval odds are lower. As a result, lenders may hesitate to approve your application or charge higher interest rates to compensate for perceived risk.

    However, having bad credit means you are still eligible for financing.

    Some lenders specialize in offering loans to individuals with bad credit, although these loans may have higher interest rates and stricter terms. Your monthly debt and income ratio are important numbers to remember so that you can make payments easily.

    Whatever your bad credit history, applying for a car loan is not impossible. The reality is that interest rates will land in the double digits.

    An interest rate of 12% or higher is a big consideration as it will cost you more in the long run. However, with that understanding, let's discuss the basics of the next steps.

    How Does Poor Credit Affect Buying a Car?

    When it comes to buying a car, bad credit can have a significant impact on the process. It affects buying a car in several ways:

    1. Higher interest rates: Bad credit leads to higher interest rates on vehicle loans. Financial institutions and lenders consider buyers with bad credit at higher risk. Higher interest rates are used to compensate for this risk.

    2. Limited loan options: Poor credit lowers the loan options as certain lenders will only approve borrowers with certain credit scores. Borrowers with bad credit may only be eligible for subprime auto loans with less favorable terms.

    3. Tougher approval process: People with bad credit face a more rigorous approval process. For example, banks will require additional documentation or a higher down payment to mitigate future risk.

    4. Less favorable terms: Bad credit can result in shorter loan terms, higher monthly payments, or stricter conditions. These factors make it more challenging for individuals to find a loan.

    5. Limited car choices: Some bad credit auto lenders may limit the types of vehicles that borrowers can purchase. For example, high-end luxury vehicles might be off-limits for those with poor credit.

    You should shop around, research lender options, and work on improving credit to increase the chances of securing more favorable loan terms. As I mentioned, I would table your idea of buying a car with bad credit for 6 months until you can improve your credit score.

    The Basics of Buying a Car with Bad Credit

    If you need better credit, finding a car you can afford can take time and effort.

    There are a few things that you need to know before you go shopping.

    Start with Budget

    Start with an estimated price of the vehicle that you are looking to purchase. Take into account the actual price and your down payment. This will impact your actual car loan. Avoid falling for the trap and making the mistake of buying an expensive vehicle that you can't afford.

    Several services offer an auto loan calculator. For example, you can visit for their auto loan calculator. You input the price of the car, loan terms, interest rates, and down payments. This will give you a rough estimate of your monthly payment.

    Find Alternative Financing

    Before heading to the dealership, try and secure your financing. It would be best if you first tried to get a loan from a bank or other financial institution. You can also get a car loan through a credit union or another lending institution. You will need to fill out a few forms, and you should be able to get an answer in about 30 mins based on what you are approved for. You will have a pre-approval for the auto loan.

    Friend and Family

    If you don't have luck with a credit union or bank approval, look at your circle of friends and family. Sometimes, you can take out a personal loan from a friend, family member, or an online lender.

    Buy Here, Finance Here

    The third option is the dealership with experience dealing with buyers with bad credit. A car dealership may be able to help you get a car with bad credit. You must provide the dealership with your current income and debt obligations.

    Buying a car with bad credit might help you rebuild your poor credit history as you pay on time and consistently.

    The Typical Interest Rates for Auto Loans with Bad Credit

    credit score tiers

    If your credit is above 780, you should be fine with getting an approved car loan.

    661-780 Credit Score

    If your credit score is considered prime from 661-780 (below 750), the average loan rate for a new car is 3.5% and 5.8% for the used car market. Most buyers fall into this category with an average credit score.

    601-660 Credit Score

    If your credit score is Non-Prime from 601-660, then the rate is 6% for new cars and 9.8 for used cars.

    501-600 Credit Score

    Once you are in the subprime tier, the rates continue to rise, for example, 9.5% for new cars and 15.9% for used cars. This is considered a low credit score.

    300-500 Credit Score

    If you are below 500, you are considered deep subprime. This is the lowest tier, and your rates will be double-digit, 12% for new cars and 19% for used cars. I suggest that you look at other options. These rates are close to the same rates as credit cards.

    4 Things to Consider If You Have Bad Credit

    Considerations abound when it comes to purchasing a car with bad credit.

    Financial Stability

    Financial stability is essential when purchasing a car with bad credit. Before making a significant purchase, assessing your current financial situation is important.

    Here are some key points to consider:

    1. Assess your monthly income: It is crucial to calculate how much money you earn each month and determine what you can afford for car payments. It is important to ensure that the payments are affordable and won't strain your finances.

    2. Consider your existing debts: Evaluating your debt-to-income ratio is crucial. This ratio compares your debt to your income. Lenders generally consider a lower ratio as a better indicator of financial stability.

    3. Evaluate your employment history: A stable employment history increases your chances of getting approved for a car loan. Lenders prefer borrowers with a solid employment history as it shows a steady income.

    4. Maintain a cash reserve: Cash provides financial security and improves your chances of securing a car loan. You can use this cash for a larger down payment, reducing the loan amount and improving interest rates.

    Maintaining financial stability is crucial when buying a car with bad credit. A steady income, effective debt management, and a cash reserve significantly influence your ability to secure a car loan and make affordable payments.

    What to Do if You Have Bad Credit

    If you have bad credit, it's very important to start paying down your debt and avoid incurring additional debt. Try to pay everything on time and keep all new lines of credit open to reduce hard inquiries. Hard credit checks will drop your score further, so it's best to keep things as is.

    Check Your Credit Report

    You can get a copy of your credit report from Equifax, TransUnion, or Experian). In addition, there are free credit history reports that are available online. Some of the most popular ones are sites like and

    Check your credit report to make sure everything looks ok and what are your outstanding debts that need to be paid.

    If you realize that the current debt will take a long time to pay off, for example, if the interest rate of your credit card is 18%+, then the lower interest rate of an auto loan might be a good option.

    Use a Bigger Down Payment

    The good news is that If your poor credit history impacts the amount you can borrow, you can offset that with a bigger down payment. Here you can leverage the help of friends and family to purchase your next car.

    Be sure to have a written agreement so that it's clear what your repayment terms are.

    Bad Credit Doesn't Have to Stop You From Getting the Car You Need

    As I mentioned in the beginning, poor credit is not permanent.

    If you are struggling with poor credit, know that there is hope. You can improve your score and, eventually, your financial situation.

    Follow these tips, and you will be on your way to a better credit score.

    • Start by reviewing your credit history. This is the first and most important step in improving your score.
    • Pay off any high-interest debt as soon as possible.
    • Stop spending on credit and lower your expenses.
    • Get pre-approved for loans at a local bank or credit union. They are usually able to work with you.

    You can change your spending habits and lifestyle to improve your credit score. If you intend to get the car you want, focus on your goal and take the right actions like paying off debt, increasing credit limits, and making bigger down payments for lower loan payments.


    Can You Buy a Car with Poor Credit?

    Yes, it is possible to buy a new one despite bad credit. Typically it is more challenging and will come with higher interest rates. Be aware that some lenders and dealerships specialize in providing auto loans to individuals with bad credit.

    How can I improve my chances of getting approved for a car loan with bad credit?

    To improve your chances of getting approved for a car loan with bad credit, check your credit reports for errors and dispute any inaccuracies. Lower your credit card debt and reduce your credit utilization to increase your credit score dramatically.

    What are the benefits of making a down payment when buying a car with bad credit?

    Making a larger down payment has several benefits when buying a car with bad credit. It can help you qualify for a loan more easily and reduce the amount you need. This will result in lower interest payments and lower monthly payments.

    What are some tips for finding an auto loan with bad credit?

    When shopping for an auto loan with bad credit, comparing rates and terms from different lenders is important. Start by checking with your current bank or credit union, exploring online lenders, or visiting car dealerships. Additionally, consider using credit score service websites to find lenders specializing in providing car loans for individuals with bad credit.

    Is a minimum credit score required to buy a car with bad credit?

    No official minimum credit score guarantees approval if you have bad credit. But scores of 600+ can usually get approval. However, individuals with lower credit scores may need to meet additional requirements or provide documentation to secure a loan.

    Who are some popular lenders that offer car loans for buyers with bad credit?

    Some popular lenders that offer car loans for bad credit include Carvana, Consumers Credit Union and RoadLoans. Be sure to compare lenders and their loan rates.

    Can I find an auto loan with a low credit score of 500?

    Yes, getting a car loan with a credit score of 500 is possible, but you will find it challenging. However, remember that the interest rates will be much higher than prime credit scores.

    What documentation do I need to finance a car with bad credit?

    When financing a car with bad credit, you will typically need to provide finance companies documentation such as proof of income, residency proof, previous loan repayment (if applicable), and identification. Lenders may also require additional finance documentation depending on their requirements.

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    Anthony Santiago - Editor-in-Chief

    About the author

    I am a passionate car enthusiast who likes to help people save money and avoid headaches when it comes to cars. I believe that everyone can find the right car at the right price. I share my tips and experience so you can learn quickly and maximize your next SUV, truck or car purchase.

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