How Your Credit Affects Your Car Loan and What You Can Do About It

Updated August 2026

Most car buyers don’t pay cash. They finance. And plenty of dealerships will hand you a loan regardless of what your credit looks like, but that doesn’t mean the terms will be any good. A weak credit score can turn an otherwise reasonable car purchase into a genuinely bad financial deal once you factor in interest, fees, and add-ons. So before you sign anything, you need to understand what your score actually means to a lender, and what you can do if it’s not where you want it.

How Your Credit Score Affects Your Auto Loan in 2013

Your credit score is a three-digit number generated by FICO Score models. Lenders across the country, including Chase, Bank of America, and SoFi, pull this number to gauge your borrowing history and decide what you’re worth as a risk. It shapes your interest rate, whether you get approved at all, and the fine print of your loan terms.

Borrowers with strong credit in Q3 2013, averaging 753 on the FICO scale, locked in new vehicle loans at an average 4.27% interest rate, according to Experian Automotive. That rate was historically low at the time, a sign of just how competitive lending had become. Drop down the credit ladder, though, and the cost of borrowing climbed fast.

How Credit Tiering Impacts Loan Terms

Lenders sort borrowers into tiers: prime, nonprime, subprime, deep subprime. In Q3 2013, 26.04% of new vehicle loans went to borrowers in the nonprime, subprime, or deep subprime buckets, per Experian Automotive. That’s roughly one in four new-car buyers carrying a higher risk label.

Used car buyers had it worse. 54.95% of used vehicle loans that quarter landed in nonprime or subprime territory. The average credit score attached to used vehicle loans was just 668, below the prime cutoff, according to Experian Automotive.

The numbers tell a simple story. Your score decides not just whether you get the loan, but how much you’ll bleed in interest over its lifetime. A borrower sitting at 753 might pay just under 4.27% APR on a $26,719 loan. Someone in the low 600s, especially working with a dealership or non-bank lender, could see rates north of 10%.

Run the math on two people financing the same $26,719 car. One has a 753 score and pays 4.27% APR; over five years, that’s roughly $3,040 in total interest. The other, a typical subprime borrower at 10% APR, pays $7,180 in interest over the same term. That gap, nearly $4,140, isn’t trivial. It’s the difference between a manageable payment and one that strains a monthly budget for half a decade.

Why Credit History Matters Beyond the Number

Lenders rarely stop at the three digits. They dig into the full file: late payments, recent bankruptcies, debt-to-income ratios, how many times you’ve applied for credit lately. The Consumer Financial Protection Bureau (CFPB) points to on-time payments and low utilization as the biggest levers in the scoring formula.

A recent bankruptcy, for example, can knock 200 points or more off a score, according to the Federal Reserve. Maxing out cards, meaning you’re using more than 30% of your available limit, sends a similar signal of distress to lenders. The Federal Deposit Insurance Corporation (FDIC) puts credit utilization at 30% of the overall FICO calculation.

How to Improve Your Score Before Applying for a Loan

Below 700? You’re likely sitting in nonprime or subprime territory. Back in Q3 2013, that meant steeper rates and worse terms across the board. It’s not permanent, though. Experian says even a single year of on-time payments can push a score up 20 to 50 points.

A secured credit card from Capital One or Discover is one starting point; both offer products built for people rebuilding credit. Keep the balance under 10% of the limit, pay it off in full every month, and let time do the rest. Payment history alone carries the most weight in your FICO Score, more than any other single factor.

What to Do If You Have Bad Credit and Need a Car Loan

Can’t wait around for your score to climb? You’ve still got options, just tread carefully. The Federal Reserve has flagged high-interest auto loans as a debt trap risk once APRs push past 10%.

Co-Signing: A Double-Edged Sword

Bringing in a co-signer with solid credit is one route. A parent, sibling, or trusted friend willing to co-sign through Bank of America or Chase could unlock a much better rate for you. But understand what you’re asking of them: they’re on the hook legally if you default. The CFPB is blunt about this, treat co-signing as a serious commitment, and only ask someone who genuinely grasps the risk they’re taking on.

If you go this route, nail down the repayment terms in writing before anyone signs. Run the numbers first with Bankrate’s auto loan calculator so you know exactly what the monthly payment looks like.

Shop Around: Credit Unions and Alternative Lenders

Not every lender scores risk the same way. Navy Federal Credit Union and Sovereign, among other credit unions, frequently beat what big dealership finance arms offer. Member-owned institutions tend to play a longer game than a dealership chasing a quick close.

Some non-traditional lenders, like LoanDepot or uBank, will work with weaker credit profiles too. Just go in with your eyes open. These lenders often charge more and like to bundle in extras, credit insurance, gap coverage, that you may not need. Read every line of the contract. The Federal Reserve warns that hidden fees alone can inflate the real cost of a loan by 30% or more.

How to Avoid Predatory Lending

“Financing for everyone” is a red flag dressed up as a selling point. These offers look generous on a billboard but often hide steep APRs and terms stacked against the borrower. The CFPB has documented dealerships luring people in with “low rate” promises that evaporate the moment inflated fees get added back in.

Ask for the full APR and the total loan cost before you sign anything. Get quotes from at least three lenders. Pull a free report from Experian to confirm your score is accurate, and if something looks off, dispute it right away through Equifax or TransUnion.

Frequently Asked Questions

How does a 753 credit score affect auto loan rates in 2013?

Borrowers with a 753 FICO Score in Q3 2013 secured new vehicle loans at an average 4.27% interest rate, according to Experian Automotive.

What is the average credit score for used car loans in 2013?

The average credit score for used vehicle loans in Q3 2013 was 668, per Experian Automotive.

What percentage of new car loans in 2013 were subprime?

In Q3 2013, 26.04% of new vehicle loans were classified as nonprime, subprime, or deep subprime, according to Experian Automotive.

How much do people typically finance for a new car in 2013?

The average amount financed for a new vehicle in Q3 2013 was $26,719, based on Experian Automotive data.

Can I get a car loan with a 580 credit score?

Yes, but with significant trade-offs. In 2013, borrowers with scores below 600, like 580, were typically labeled subprime or deep subprime and faced much higher interest rates, often above 10%. The Federal Reserve notes that such loans carry a higher risk of default.

Does having a co-signer improve my chances of approval?

Yes. A co-signer with strong credit can help you qualify for a loan even with poor credit. However, the co-signer is legally responsible for repayment if you default. The CFPB recommends only co-signing with someone who fully understands the obligation.

Are credit unions better than dealerships for car loans?

Often, yes. Credit unions like Navy Federal and Sovereign tend to offer lower interest rates and fewer hidden fees than dealerships. They prioritize member service over profit, according to the Federal Reserve.

What should I avoid when shopping for a car loan?

Avoid lenders that promise “easy approval” without credit checks. These are often predatory. Also avoid loan terms with balloon payments, excessive add-ons like credit insurance, or APRs over 12% unless you have no other option. The CFPB cautions against “buy now, pay later” traps.

How long does it take to improve a credit score?

Improvement can begin within 6-12 months with consistent on-time payments and low credit utilization. The Experian website notes that 80% of borrowers see a 20-point increase within a year of responsible credit use.

Can a bankruptcy ruin my chances of getting a car loan?

Not entirely. While a bankruptcy can reduce your score by 200+ points, lenders still approve loans for borrowers with recent bankruptcy filings. However, you’ll likely pay higher interest rates. The Federal Reserve reports that 35% of auto loans in 2013 were made to borrowers with prior bankruptcies.