November 02, 2023
When you have bad credit – say, a credit score around 550 – getting approved for a car loan can be difficult. While you should try for a pre-approval with your bank or credit union, you more than likely are going to need a subprime lender. These lenders work exclusively with bad credit car buyers and are able to offer financing to many of them. We can help you get connected to one, but first, we want to explain just what you need to do to get a bad credit auto loan.
4 Things to Keep Track of When Financing a Car
Subprime lenders work through special finance dealerships and offer car loans to borrowers struggling with credit issues. These lenders run credit checks but consider outside factors to determine approval. You need to have the proper documentation ready before you head to the dealer, such as proof of income, proof of residence, and proof of a working phone.
Also, you need to keep track of these four things before you start the financing process:
Credit scores and reports – Know where your credit score stands, and what’s on your credit reports. You’re entitled to a free copy of your credit report every week from the three major credit bureaus by visiting www.annualcreditreport.com. As for your credit score, most lenders look at your FICO score, and if your bank or credit card company doesn’t offer a free FICO check, you can see yours for a fee through a number of websites and services.- Finances – Know what your budget is, and how much you’re willing and able to spend on a vehicle. You need to consider additional expenses of car ownership, such as fuel, insurance, and maintenance.
- Interest rates – Look up the current interest rate trends, and see what people with your credit score range are getting. You should, if possible, also rate shop to see what different lenders are willing to approve you for so you can pick the best offer.
- Down payment – A down payment is usually required with a bad credit auto loan. The minimum amount needed varies, but most subprime lenders ask for a down payment of at least $1,000 or 10% of the vehicle’s selling price, whichever is less.
How to Increase Your Approval Odds
As long as you meet the lender’s minimum requirements, you shouldn’t have an issue getting approved for a loan. However, if possible, you should try to increase your approval odds. Two common ways to do this include:
- Adding a cosigner – Not all subprime lenders require a cosigner, but having one on hand doesn’t hurt. Adding a cosigner to a car loan could get you a better interest rate and make the overall cost of the loan cheaper. Your potential cosigner must have good credit and a qualifying income.
- Making a larger down payment – We recommend that you make the largest down payment you can comfortably afford if you have bad credit. The reason is that you end up saving money, and this can really make a difference considering borrowers with bad credit typically qualify for higher interest rates. You can use cash, trade-in equity, or a combination of both to come up with a down payment.
Dealerships That Offer Car Loan 550 Credit Score
When you have a credit score as low as 550 and are on a tight budget, where do you go to find the right auto financing? You could try to get pre-approved for a bad credit car loan with your bank or credit union, but these lenders place a heavy emphasis on your credit score to determine approval.
Instead, you likely need to find a local special finance dealership that’s signed up with subprime lenders. Subprime lenders specialize in financing credit-challenged car buyers, but they have additional requirements you need to meet in order to get approved.
Subprime lenders have rules as to the least amount they can extend for financing, with the minimum typically set at $5,000. In addition, subprime lenders typically require a down payment. You can expect to be asked for the lower amount between $1,000 or 10% of the vehicle's selling price, although this varies by lender.
This means that if you want to finance a car worth $5,000, you would only need $500 to meet the down payment requirement. While it's okay to settle for the minimum down payment, a larger down payment makes your auto loan more affordable.
The Bottom Line
If you have a 550 credit score, you may still be able to get approved for an auto loan. In addition to the right documents, a possible cosigner, and a larger down payment, you also need to work with the right lender. The Car Connection is here to help you find financing.
Here at The Car Connection, we help bad credit car buyers by connecting them to local special finance dealerships that are signed up with subprime lenders. That’s not all we can do, though. With our new and used car sections, you can see what vehicles are for sale near you, and compare different cars to narrow down exactly what you need.
We work with a nationwide network of dealerships that have the lending resources available for people struggling with credit. Get started today for free by filling out our car loan request form.
FAQs
While you technically can get approved for a loan with a 550 credit score, you'll likely face more challenges and pay significantly more for the loan than if your score was higher. Most lenders won't consider borrowers with scores less than 580 – but you may still be able to find one if you know where to look.
Can you get approved for a car loan with a 550 credit score? ›
The Bottom Line. If you have a 550 credit score, you may still be able to get approved for an auto loan. In addition to the right documents, a possible cosigner, and a larger down payment, you also need to work with the right lender.
How big of a loan can I get with a 550 credit score? ›
What can I get with a 550 credit score? Some lenders like Avant can fund loans for up to $35,000 for borrowers with a minimum credit score of 550. You might also be able to qualify for a car loan or credit card. It depends on what you need the money for and how much you need.
What kind of interest rate can I get with a 550 credit score? ›
How bad credit affects rates
| Credit score | Average loan interest rate |
|---|
| 300–629 | 28.50%-32.00% |
| 630–689 | 17.80%-19.90% |
| 690–719 | 13.50%-15.50% |
| 720–850 | 10.73%-12.50% |
Apr 29, 2024
While there is no set credit score to get an auto loan, a majority of approved borrowers have scores above 660. Having a low credit score won't necessarily keep you from getting an auto loan, but you will likely pay a higher interest rate.
What credit score do you need to get a $30,000 loan? ›
This allows them to look at your history from the past seven years and see whether you've typically made payments on time. For a $30,000 loan, you'll typically need a credit score above 600 just to qualify or above 700 to get a competitive rate.
What is the lowest credit score to buy a car? ›
In general, you'll need a FICO credit score of at least 600 to qualify for a traditional auto loan. However, the minimum credit score required with vary from lender to lender. As interest rates increase due to inflation, securing a subprime auto loan may be more difficult — but not impossible.
What credit score do I need for a $10,000 loan? ›
Requirements will vary across lenders. However, qualifying for a $10,000 personal loan typically requires a credit score that exceeds 640, an active checking account, and a steady, verifiable income, among other factors.
How long does it take to fix a 550 credit score? ›
Average Recovery Time
The good news is that when your score is low, each positive change you make is likely to have a significant impact. For instance, going from a poor credit score of around 500 to a fair credit score (in the 580-669 range) takes around 12 to 18 months of responsible credit use.
Is 550 a bad FICO score? ›
Your score falls within the range of scores, from 300 to 579, considered Very Poor. A 550 FICO® Score is significantly below the average credit score. Many lenders choose not to do business with borrowers whose scores fall in the Very Poor range, on grounds they have unfavorable credit.
Credit score distribution: How rare is an exceptional 800 to 850 score?
| FICO® Score range | Percent within range |
|---|
| 300-499 | 3% |
| 500-549 | 6% |
| 550-599 | 7% |
| 600-649 | 9% |
4 more rows6 days ago
Compare the Best Auto Loan Lenders
| Company | Used APR Range | Used Loan Terms |
|---|
| PenFed Best Overall | 6.49%–17.99% | 3–7 years |
| AUTOPAY Best for Bad Credit/Low Rates | As low as 5.69% | 2–8 years |
| Consumers Credit Union Best Credit Union | As low as 6.84% | 36–84 months |
| LendingTree Best for Refinance | As low as 5.99% (Refinance) | 36–72 months (Refinance) |
3 more rowsSep 6, 2024
Top ways to raise your credit score
- Make credit card payments on time. ...
- Remove incorrect or negative information from your credit reports. ...
- Hold old credit accounts. ...
- Become an authorized user. ...
- Use a secured credit card. ...
- Report rent and utility payments. ...
- Minimize credit inquiries.
While you technically can get approved for a loan with a 550 credit score, you'll likely face more challenges and pay significantly more for the loan than if your score was higher. Most lenders won't consider borrowers with scores less than 580 – but you may still be able to find one if you know where to look.
Which FICO score is used for auto loans? ›
FICO Score 5 and FICO Score 8 are both common credit scores. Mortgage and auto lenders often use FICO Score 5, while credit card issuers typically use FICO Score 8.
What credit score is needed to buy a car without a cosigner? ›
There isn't one specific score that's required to buy a car because lenders have different standards. However, the vast majority of borrowers have scores of 661 or higher.
What credit score is acceptable for a car loan? ›
While you can find financing with any credit score, a good credit score for a car loan is usually between 670 and 850. Your credit score is affected by many factors including payment history, amounts owed/utilization, length of credit history, credit mix, and new credit.
Is 550 a big car payment? ›
An affordable car payment would be one that doesn't exceed $600 a month, based on the rule of thumb that your car payment shouldn't be more than 15% of your take-home pay.
How much of a loan can I get with a 560 credit score? ›
You can borrow anywhere from a few thousand dollars to $100,000+ with a 560 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.
Can a 500 credit score get me a car? ›
We understand that life happens, and we're here to help you get back on the road with an auto loan for bad credit that fits your budget and financial situation. Yes, it is possible to get a car loan with a credit score of 500, but it can be infinitely more challenging to find a lender willing to approve the loan.
Credit scores and reports – 
