How to Get a Car Loan with a 620 Credit Score

A 620 credit score sits right on the edge of what many lenders consider "fair" credit. While it’s not terrible, it’s also not great—meaning you might face higher interest rates or stricter loan terms when applying for a car loan. In today’s economy, where inflation and rising interest rates make big purchases even more challenging, securing an auto loan with a 620 credit score requires strategy.

This guide will walk you through actionable steps to improve your chances of approval, negotiate better terms, and avoid common pitfalls.

Understanding Your 620 Credit Score

Before diving into loan applications, it’s crucial to understand where a 620 FICO® Score places you in the lending world.

What Does a 620 Credit Score Mean?

• Fair Credit Range: Typically, scores between 580–669 are considered "fair."
• Higher Risk to Lenders: You may qualify for loans, but lenders see you as a moderate risk.
• Interest Rates: Expect APRs between 10%–15%, depending on the lender and market conditions.

Why Your Score Matters in 2024

With the Federal Reserve keeping interest rates elevated to combat inflation, borrowing costs remain high. A lower credit score means you’ll pay significantly more over the life of the loan compared to someone with a 700+ score.

Steps to Secure a Car Loan with a 620 Credit Score

1. Check Your Credit Report for Errors

Mistakes on your credit report could be dragging your score down. Use AnnualCreditReport.com to pull free reports from all three bureaus (Experian, Equifax, TransUnion). Dispute any inaccuracies—like incorrect late payments or outdated collections—to potentially boost your score.

2. Save for a Larger Down Payment

A bigger down payment reduces the lender’s risk, which can:
- Increase Approval Odds: Lenders may overlook a lower score if you put down 20% or more.
- Lower Monthly Payments: You’ll borrow less, making repayments more manageable.

3. Get Pre-Approved Before Shopping

Pre-approval lets you:
- Compare Offers: See rates from multiple lenders without a hard credit pull.
- Negotiate Better: Dealers take you more seriously when you walk in with financing already secured.

Where to Get Pre-Approved:

• Credit Unions: Often offer lower rates than big banks.
• Online Lenders: Platforms like LightStream or Capital One Auto Finance cater to fair-credit borrowers.
• Dealership Financing: Some brands (e.g., Hyundai, Kia) have subprime programs for scores as low as 580.

4. Consider a Co-Signer

Adding a co-signer with good credit (680+) can:
- Secure a Lower APR: You might qualify for prime rates.
- Expand Lender Options: More institutions may be willing to approve the loan.

Warning: If you miss payments, the co-signer is legally responsible—so only pursue this if you’re confident in your ability to repay.

5. Choose the Right Car

Lenders prefer loans on reliable, moderately priced vehicles. Avoid:
- Older Models: Cars over 10 years old may not qualify for traditional financing.
- High-Mileage Vehicles: Lenders see these as higher risk.
- Luxury Brands: Expensive cars mean larger loans, which are harder to approve with fair credit.

Best Cars for a 620 Credit Score:

• Used Sedans: Honda Civic, Toyota Corolla (under $20K).
• SUVs with Good Resale Value: Mazda CX-5, Subaru Forester.

6. Shorten the Loan Term

While a 72-month loan lowers monthly payments, you’ll pay more in interest. Opt for a 48- or 60-month term to:
- Save Thousands in Interest.
- Build Equity Faster: Helps if you want to trade in the car later.

Pitfalls to Avoid

1. Skipping the Fine Print

Some dealers push "buy-here-pay-here" loans with sky-high APRs (up to 25%). Always read the contract before signing.

2. Rolling Negative Equity into a New Loan

Trading in a car you owe money on can trap you in a cycle of debt. If possible, pay off the balance first.

3. Applying with Multiple Lenders at Once

Each hard inquiry dings your credit by a few points. Rate-shop within a 14-day window to minimize the impact.

Alternative Options If You’re Denied

1. Improve Your Credit First

• Pay Down Debts: Lowering credit utilization can quickly boost your score.
• Become an Authorized User: Ask a family member with good credit to add you to their card.

2. Lease Instead of Buy

Leasing companies sometimes accept lower scores, and payments are often cheaper than loans. Just be mindful of mileage limits.

3. Explore Buy-Now-Pay-Later Programs

Some platforms (e.g., Carvana’s financing) offer flexible terms for fair-credit buyers.

Final Thoughts

With preparation and research, a 620 credit score doesn’t have to stop you from getting a car loan. Focus on improving your financial profile, comparing lenders, and choosing a vehicle that fits your budget—not just your lifestyle. In today’s tight economy, every percentage point saved on your APR can make a huge difference.