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What credit score do I need to refinance a car?

  • Auto Refinance
  • Xavier Sabastian
  • 8 minutes

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Shopping for a new car loan rarely happens without considering the question, “What credit score is good to refinance a car?” This post will break down everything you need to know about it!

If you think there is one particular ‘golden’ number that serves as the perfect credit score, you’re in for a surprise! The fact is that there isn’t one single credit score or range you need to refinance a car.

Credit scores are only one part of the refinancing process. There are numerous lenders who cater to different borrowers – all with different requirements. Simply put, the answer to the question ‘What credit score is needed to refinance a car?‘ can vary from one company to another.

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Is credit score the only factor to refinance my car?

While your credit score is an important factor in car refinancing, it’s not the only one that decides what APR you get. There are other criteria that decide your new interest rate, like:

1. The loan amount: Are you planning to refinance the entire loan amount, or will you be making a down payment? Depending on that, your interest rate may vary.

2. Loan term: Choosing a long loan term can help you get a lower refinance APR and vice versa. That’s because the lender can earn more interest through a longer loan term, even while slashing interest rates for you in the short term.

3. Age of the car: Lenders will not typically refinance vehicles older than 10 years. There may be some lenders willing to refinance up to 15  years but with higher interest rates.

4. The credit score of the co-signer or co-borrower: Refinancing with a lower APR will be easier if you have a co-signer with good credit. During the approval process, the co-signer’s score will be given more weightage than the primary borrower.

5. Employment status: Having a permanent or government job means you can score lower interest rates due to a lesser risk of default. On the other hand, being self-employed or having a contractual job could mean higher APRs for you.

Will a bad credit score stop me from refinancing my car?

Just because you have a bad credit score does not mean you won’t find lenders to refinance. Many lenders will provide borrowers a loan even if their score is much below 600. However, you may have to bring on a co-signer, make a larger down payment, or agree to variable interest rates to refinance with bad credit.

Also read: What are the pros and cons of refinancing a car?

What credit score do I need to refinance my car?

Impact of credit score on your loan application

Credit ratings appear to be related to a false sense of security. People frequently believe that their credit score is the only factor determining whether they can get a good auto refinance deal. While it isn’t the only consideration, it does affect the interest rate you receive. The general rule is that the higher your credit score, the greater your chances of receiving a reduced interest rate.

Different credit ranges for getting the best APRs

It isn’t easy to know which scoring model to utilize because there are so many. On the other hand, lenders frequently consider your FICO score divided into groups.

  • 850-800:¬†Exceptional
  • 799-740:¬†Very good
  • 739-670:¬†Good
  • 669-561:¬†Fair
  • 560-300: Poor

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Is there a minimum credit score to refinance an auto loan?

For refinancing your auto loan, there is no set minimum credit score. Different lenders have different standards, and some lenders specialize in working with clients who have bad credit, such as those who have had bankruptcies or repossessions.

While there’s no way to know for sure how likely you are to qualify for a loan, you can make an educated guess based on the following:

  • Debt-to-income ratio:¬†The DTI is indicative of how much you owe each month on loans compared to how much you earn. The lower this ratio is, the easier it will be to qualify for a loan with a bad credit score.
  • Loan-to-value ratio:¬†The car’s LTV ratio is indicative of how much you owe on the car vs. how much it is actually worth. Ideally, a lower LTV can help you qualify even with a bad credit score.
  • The annual income of the borrower: Even if you have a bad credit score, lenders may relax criteria if you can show you have a high enough income to repay the car loan.

For example, take a look at the table below. Borrowers with credit scores as low as 441 were able to find lenders because of their decent DTI, LTV, and payoff amounts.

Year Applicant Credit Score Original Rate Approved Rate LTV Retail DTI Payoff
2020 561 18.75% 11.75% 70% 35% $18,900
2021 441 20.75% 15.65% 85% 36% $19,700

TL;DR: A low loan-to-value ratio, low debt-to-income ratio, lower auto loan balance, and having a secure income can help balance out poor credit and improve your chances of getting approved for auto loan refinancing.

Average APRs for auto loan refinancing based on credit score

While many factors go into calculating your refinance APRs, we can still track the average interest rates based on credit reporting agencies like Experian, Transunion, and Equifax. You can see them in the table below.

Credit Score   New Car Loan APR  Used Car Loan APR  Refinance Car Loan APR  
    750 or higher        6.33%         6.58%               3.38%  
      700-749        10.64%       10.89%               4.32%  
     600-699        14.27%       14.52%               6.74%  
    451-599        17.52%        17.77%                9.39%  
    450 or lower         Not Applicable (N/A)          N/A                 N/A  

*as of May 2022

How does auto loan refinancing affect your credit?

Whenever you apply to refinance your car, the lender will pull your credit score to check what APR is best to offer you. This is called a hard credit inquiry and will cause your credit score to drop by a few points. It’s also why you should refinance only after building your credit score above what it was when you first applied for your loan.

  • While a credit drop is inevitable, you can reduce the magnitude of the drop by building your score to above 700
  • You can also pre-qualify with several lenders which only need a soft credit pull
  • FICO and VantageScore allow rate shopping within a certain window (14-45 days). They consider multiple inquiries within this period as one single inquiry as long as they are performed within this window.

Relation between cash-out refinancing and credit score

Cash-out or cash-back refinancing is when you borrow a larger amount than your current payoff amount. You can use it to pay off the older loan and receive the remaining amount in cash. However, you need to have positive equity in the vehicle, i.e., it should be worth more than what you owe.

Therefore, if the car is worth $15,000 and the loan balance is $9000, you have positive equity in it and can refinance for an amount up to 125% of the car’s worth ($18,750). You can use the $6,000 difference for any immediate financial emergencies.

A cashback auto refinancing deal will negatively affect your credit score. This is because you are borrowing a larger amount than what you owe, therefore increasing your overall level of debt.

Frequently Asked Questions (FAQ) 

What is the best credit score to refinance a car? 

The higher your credit score, the better refinance rates you will get. There is no single ‘best’ credit score that qualifies you to be able to refinance a car. However, companies recommend that you have a score above 600 on both the FICO and VantageScore rating systems.

Can I refinance my car with a 600 credit score? 

Yes, 600 lies in the ‘Fair’ credit category for both FICO and VantageScore. You can try to wait a few months to build your score above 660, which can put you in the ‘Good’ category.

Can I refinance my car with a 640 credit score?

Yes, 640 lies in the ‘Fair’ credit category for both FICO and VantageScore credit bureaus. If it’s possible, try and build your credit score to above 660 in the next few months before refinancing. This will help you enter the ‘Good’ credit range and get you moderately better APRs.

What is the lowest credit score you can have to refinance a car?

There is no single minimum credit score that is accepted across the board. Different refinance lenders have different minimum credit score requirements, which can vary based on other factors like debt-to-income ratio, loan-to-value ratio, annual income, and more.

How long should you wait to refinance a car?

Ideally, you should wait at least 6-12 months before refinancing your car. This is because it will take a few months for your credit score to rise after a hard credit inquiry and a few more months before it reaches a ‘good’ or ‘excellent’ credit range.

What credit score is good to refinance a car?


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