It’s no secret your credit score is important. But many are surprised how great a role it can play in the overall cost of an auto loan. When financing a vehicle, your credit score matters in terms of getting approval for a car loan, the amount you will need for a down payment, and the total interest you will pay over the life of your auto loan.

How Credit Score Impacts Your Car-Buying Journey

Your credit score is a three-digit number that sums up your credit report and shows lenders how likely you are to pay back your debt. It is one of the main considerations a financial institution, like a credit union or bank, takes into account when deciding whether to lend to you.


Here is how your credit score can impact you when you buy a car:

  • Getting Approval for an Auto Loan: Having a good credit score makes it possible for you to get approval for an auto loan you may need on a vehicle purchase. However, while most people are able to finance a new vehicle even with a lower credit score, what they pay can vary tremendously.
  • Amount of Down Payment Needed: Your credit score may also play a role in your down payment. If you have a low credit score, you might be required to put a larger down payment on the vehicle. This helps establish some equity in the car and lowers the risk level for the lender.
  • Amount You Pay in Interest: Ultimately, your credit score is one of the primary contributing factors determining how much interest you’ll pay on your auto loan. If your score is less than perfect, you'll find yourself paying a higher interest rate for your new car. In many cases, the interest rate you’ll pay on your auto loan is determined almost entirely on your credit score. The lower your credit score, the higher your interest rate will be and the more interest you will pay over the life of the loan.

How to Boost Your Credit Score

Review your credit score well before you intend to purchase a new car. See if you can make improvements in the time leading up to your car purchase that will help you lock in a lower rate. Simple steps can help you improve your credit score.

If you already financed your vehicle and received a higher interest rate, there are still opportunities to lower your total interest cost. By making your auto loan payments on time, every time, you’ll help to increase your credit score. Once you begin to see your credit score rising, consider refinancing your auto loan. This process allows you to lock in better rates, and usually more favorable terms.

If you are in the market for a new car, Credit Union 1 can help you take the next step forward with quick pre-approval. Start an auto loan application today.