Technically, there’s no minimum credit score required to refinance your car. Your score is one of multiple factors that lenders review as part of your application.
That said, you’ll typically qualify for better interest rates with a strong credit profile. But having bad credit may not automatically exclude you from getting approved, either. You will, however, likely pay more to borrow than a person with a score of 600 or higher.
Here, learn the ideal credit score when refinancing an auto loan, how your credit score will impact your new loan, current auto refinancing rates, and more.
Key Points
• A FICO® score of 600 or higher generally leads to better loan offers for auto refinancing.
• Different credit levels significantly impact the terms and interest rates of refinanced auto loans.
• Refinancing an auto loan can impact your credit score, both positively and negatively.
• Checking your credit report for errors could help build your score and improve your chances of refinancing approval.
• Maintaining a low debt-to-income ratio enhances the likelihood of successful auto loan refinancing.
Is There a Minimum Credit Score to Refinance an Auto Loan?
There’s no specific credit score that’s needed to refinance your car. Loans are available for people with a wide range of scores. However, typically, a FICO® score of 700 or above will give you access to the most favorable loan offers, while a score of 600 or higher means you’ll likely get standard offers.
As you start shopping for a new loan, it’s important to consider your reasons for refinancing your auto loan:
• The first reason you might want to refinance would be that you might now qualify for a better interest rate than when you first got your car loan. That could be because rates have lowered in general or because you have built your credit score. A lower interest rate could reduce how much you dole out in interest over the life of the loan.
• Another common reason for refinancing is to simply lower your monthly payments and take some stress off your budget. You might do this by extending your loan term. However, this means you’ll be making car payments for a longer period of time and may pay more in interest over the life of the loan.
How Different Credit Levels Affect Auto Loan Refinancing
Refinancing a car is usually most difficult when you have a bad credit score, meaning between 300 and 579. However, you may still be able to get approved, especially if you’ve demonstrated a strong track record of making your current car payments on time.
Another strategy that could help you get approved is to refinance with a loan cosigner. This puts another person on the car loan with you. The idea is that their credit score and even potentially their income could help you get approved. It also puts your cosigner on the hook for the payments if you don’t make them, and their credit can be damaged significantly if you miss payments. (Worth noting: The cosigner has no legal claim to the vehicle unless you add them to the title.)
With a good credit score, you’re more likely to get approved for a refinance and with a more competitive rate. However, your income still needs to support the loan payments. A lender will verify your income as part of the application process and also compare it to your debt levels.
This comparison is called your debt-to-income ratio. If your monthly debt payments are too large compared to your income, you could have trouble getting approved.
Recommended: What Should Your Average Car Payment Be?
Cash-Out Refinance and Credit Scores
In many cases, the best time for refinancing may be when your car is worth more than you owe.
This situation could arise for a couple of different reasons. The first is that you’ve taken good care of your car and it hasn’t depreciated too quickly. The second is that you’ve been making extra payments on your car loan, keeping your overall balance lower than the value of the vehicle.
In these scenarios, you could apply for a cash-out refinance on your auto loan. This lets you take out a larger auto loan and receive the cash difference between the smaller, original loan and the new, larger loan. The car is used as collateral, just as it would be with any other auto loan. However, you do lose the equity you had before.
A cash-out refinance can negatively impact your credit score, so that is something to keep in mind. When you apply, you’ll likely see a slight dip once the lender performs a hard credit check.
Additionally, a cash-out refinance can change the overall amounts you owe and a higher overall level of debt could lower your score.
Increasing Your Odds of Approval
If you’re thinking about refinancing an auto loan, you can take a few steps to increase your chances of approval.
• First, make sure your credit history is accurate. You can do this by checking your credit reports. Double check that your balances are accurate and that no fraudulent accounts have been opened in your name. You can file a dispute with the credit bureaus if you see something that is inaccurate.
• Next, continue to pay your bills on time, especially your car payment. Most lenders use an industry-specific credit score to buy a car. This places a great priority on your previous auto loan payments.
• Also, it can be a good idea to work on paying down your debt, especially if you’re concerned about your debt-to-income ratio. Not only can lower debt amounts build your credit score, it may also help you qualify for a higher loan amount. The maximum debt-to-income ratio allowed by a lender is usually between 45% and 50% (including the new car payment), but many lenders prefer no more than 36%.
For example, say your monthly income is $8,000 and you’re already paying $1,250 on a mortgage, $250 on a car loan, and $250 on other debts. That puts your debt-to-income ratio at 25% ($2,000 divided by $8,000), leaving you comfortably below the usual requirement.
How Does an Auto Loan Refi Affect Your Credit?
When you take out a new loan, your credit will be impacted in a few different ways. However, that doesn’t mean that refinancing your car is a bad idea, as long as it helps you meet your primary financial goals. A few ways auto loan refinancing affects your credit score includes:
New inquiry on credit report: When you’re figuring out what kind of interest rates you can get, remember to rate-shop in a set window of time. Auto credit bureaus may count multiple hard inquiries for the same type of loan as just one inquiry if they’re performed within 14 to 45 days, depending on the scoring method being used. If you’re sporadic with your applications, you could cause your credit score to drop up to five points for each one.
New account: Part of your credit score is based on the combined age of all your accounts. When you refinance an auto loan, you’re closing one account and opening another. That can cause your average age of accounts to go down and cause a drop in your score.
Amounts owed: A new car loan could cause a big dip in your score since it’s adding a large amount of new debt. But a refinanced car loan is usually for the same amount as the debt you already have, so it shouldn’t have a huge impact unless you do a cash-out refinance.
Recommended: Loan After Rebuilt Title
Auto Loan Refinance Rates
Of course, interest rates vary among different lenders. But the following chart may help you get a sense of what you’re likely to be offered.
Average Auto Loan Interest Rates
The credit bureau Experian® published the average auto loan rates based on credit range for the third quarter of 2024. This gives you a jumping off point about what you might expect when it’s time to refinance.
|
New Car Loans |
|
|---|---|
| Credit Category | Average Interest Rate (Q3 2024) |
| 300-500 (Deep Subprime) | 15.43% |
| 501-600 (Subprime) | 13.00% |
| 601-660 (Near Prime) | 9.73% |
| 661-780 (Prime) | 6.70% |
| 781-850 (Super prime) | 5.08% |
|
Used Car Loans |
|
|---|---|
| Credit Category | Average Interest Rate (Q3 2024) |
| 300-500 (Deep Subprime) | 21.55% |
| 501-600 (Subprime) | 18.95% |
| 601-660 (Near Prime) | 14.07% |
| 661-780 (Prime) | 9.63% |
| 781-850 (Super prime) | 7.41% |
How to Look for Auto Loan Interest Rates
It’s important to shop around for auto loan refinance rates no matter what your credit score may be. One way to compare multiple rates without hurting your credit score is to use online tools that allow you to gather options. Dig into the details, however, to be sure you understand the annual percentage rate (APR), fees, and terms, and know the true cost of the loan, both in terms of your monthly payment and the overall cost of borrowing.
Once you find the best refinance quote, you can finish the application with your lender of choice.
Recommended: Refinancing After Repossession
The Takeaway
You can qualify for an auto loan refinance with a wide range of credit scores, depending on the lender and your other credentials. However, the higher your score, the more likely you are to get favorable rates and terms on your refinance. Getting a cosigner or taking the time to establish a stronger credit history can help you get more favorable interest rates on your car loan refinance.
And, of course, comparison shopping (within a short window of time) can also help you find the loan that is best suited to your needs.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
What is a good credit score for refinancing a car?
You will typically need a credit score of at least 600 in order to qualify for a refinance car loan. Those with higher scores are likely to access more favorable (or lower) rates and terms.
Can I refinance my car loan with a 500 credit score?
It can be challenging to refinance an auto loan with a credit score of 500. If you do find a lender, you will likely face very high interest rates and fees, as well as less favorable terms. Make sure you fully understand the total cost of the loan and your options before signing on.
Can refinancing hurt your credit?
When you refinance a loan, the lender typically does a hard credit pull to review your credit file. This causes a small (perhaps several points) drop in your credit score, which is temporary. Your score should be positively impacted as you make on-time payments and follow other credit-building habits.
Photo credit: iStock/MicroStockHub
SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
This article is not intended to be legal advice. Please consult an attorney for advice.
SOALR-Q225-030