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Getting a 650 Credit Score Car Loan can sometimes be an intimidating task.

Credit scores often seem like voodoo or magic when you are trying to get a car loan.

  • One minute, you think you have a pretty good chance of a high-quality loan.
  • The next minute, the dealer is telling you that your 650 credit score concerns them.
  • Suddenly, you see your interest rate rising higher and higher.

Even worse, the dealer is debating denying you a loan! If this has ever happened to you, you are not alone.

That’s because people with a 650 credit score are becoming more common every day. This rate is growing so prevalent because it lies right on the threshold of fair and bad credit.

Unfortunately, a majority of people in the nation have credit scores that fall around this range. While this may improve your chances of getting a loan, it can needlessly complicate the process by making lenders unnecessarily concerned.

As a result, it is essential to understand why a 650 credit score is such a big deal when it comes to getting an auto loan. This process will include knowing how your credit score is calculated by FICO, the leading credit score group.

You will also learn how your base FICO score differs from the one used to buy a car or truck. Yes, there is a difference between these two scores, and they will influence your loan success.

How lenders view a 650 Credit Score Car Loan

When you have a 650 credit score, you are in a unique situation. While 650 is considered a “fair” credit score, it is very close to being considered a poor rating.Even dropping a single point will put you in the poor category. As a result, lenders may be a little jumpy when offering you a loan for a car.

That said, you shouldn’t have a hard time getting some loan from most lenders. However, you are more likely to run into some complications. That’s because lenders see those with a 650 credit score is capable of two types of changes.

First of all, you could improve your credit and make all of your payments on time over an extended period. This payment success showcases that you are not a risk and will make them happy that they loaned to you.

However, you are also a risk with this rate because your score could drop if you miss even a single payment during the lifetime of your loan. As a result, having a 650 credit score is kind of like walking a tightrope over a raging waterfall.

Making it to the other side will be fantastic, but one false step and you’re tumbling into dangerous territory. Unfortunately, it’s not quite as exciting as this description would lead you to believe.

That is why having a 650 credit score may complicate your auto loan shopping and make it more difficult for you to get the car you want.

For example, lenders who see you have a 650 credit score may:

  • Set up an interest rate that seems unfair
  • Demand a higher down payment
  • Talk you into buying a less expensive or fancy car
  • Suggest alternative financing methods
  • Deny your loan completely

While denial with a 650 credit score isn’t that likely, it can still happen. It can be a very frustrating situation if you need a car to improve your life.

For example, if you just got a new job that could improve your finances, you need a car to get to it. However, a denied car loan could make it harder for you to improve your financial life.

Thankfully, outright denial isn’t as likely to happen if you have a 650 credit score. Most auto lenders will be willing to work with you to find a lending solution that suits both of your needs. However, they are likely to try one of the steps mentioned above to minimize their risk.

They are even more likely to behave in this way if your auto FICO score is lower than your base score. Understanding the differences between these two rates is crucial for improving your chances of loan success. Later on, we will discuss how you can improve both your base FICO and your auto FICO scores.

How a Base FICO Score Differs From an Auto FICO Score

While your auto FICO score isn’t likely to differ heavily from your base FICO score, some differences could affect it. As a result, it is important to understand how your FICO score is decided and the ways it influences your auto score.

In this way, you can know why you have a 650 score and work to address this problematic situation. It can also help you prepare for confusing situations, such as a denied loan when your base score is higher than 650.

While this situation isn’t likely, it can occur when your lender uses a lower auto score to determine your trustworthiness in paying back your debts.

How FICO Decides Your Base Score

The exact process used to gauge your credit score is a bit of a mystery. That said, there is a basic formula used to gauge your credit. This formula includes your payment history, how much you owe, the length of your credit history, new credit sources, and the type of credit that you are currently using. It is important to understand that these variables are not weighed at the same percentage.

For example, payment history and amounts owed make up 35 and 30 percent of your score, respectively. As a result, they dictate nearly two-thirds of your credit score.

The length of credit history, new credit sources, and the types of credit you are currently using are weighed at 15, 10, and 10 percent. As a result, the history of your loan amounts is much more important than current credit amounts.

This fact means that having a 650 base score isn’t too bad for n auto loan. That’s because it showcases you have done an average job of paying your debts and owe a reasonable amount of debt. It also indicates to lenders that you are currently managing your credit at a reasonable rate.

However, your auto FICO score, while influenced by your base score, is rated differently and can vary from your base score in hard-to-predict ways.

The Nature of an Auto Score

The differences between your base score and your auto score are subtle. The base score indicates how likely you are to pay back any credit or loan. However, an auto credit score is designed to gauge your chances of managing the financial demands of an auto loan.

It is more focused and specific to this type of loan. As a result, it is more heavily influenced by your car buying history. It also has a slightly different range than a base FICO score, as it goes from 250 to 900. Those who have never gotten a car loan in the past are less likely to have an auto FICO score.

In this situation, your base FICO score is important because it gives lenders an insight into how likely you are to pay back a general credit amount. However, if you have a history of paying back auto loans in the past, your auto score may be higher than your base score. As a result, a lender may be more likely to give you a loan.

For example, you may have an overall rating of 650 but an auto rating of 800. As a result, you may be more likely to get a higher-quality loan because you’ve shown you know how to manage auto loans in the past.

However, possessing an auto rating of 700 or so is equivalent to a rating of 650. At this rate, an auto lender may be concerned about your ability to repay your loans. This score is influenced by a variety of factors in your auto loan past, including:

  • Payment history
  • Loan settlement
  • Repossessions
  • Loans sent to collection
  • Bankruptcy claims on a car

All of these factors can complicate your attempt to get an auto loan. Importantly, if you have suffered from one or more of those problems in the past, your auto score is likely to be at around the 650 level. Even more confusingly, some lenders will ignore your auto rate and instead consider your FICO base score when deciding on a loan.

That’s why it is essential to know what scores are being used by your auto dealers. Determining this fact requires working with your dealer and talking about your score in a candid manner. However, you may also have to do a little detective work by talking to the credit bureaus they are using to determine your auto loan.

Figuring Out Which Score is Being Used

When you talk to a lender about buying a car, you can just ask them what FICO score they are using to determine your rate. Most will share this information with you to give you a better understanding of your lending situation. However, others may deny you the right to know this fact. There are several reasons they may take this step.

Most of them include privacy issues or a desire to get a higher interest rate on your auto loan. Investigate their desk for signs of the credit bureau that they use to determine your FICO score.

For example, lenders who use Experian are using Auto Score 8 and 2 to determine your rate. They won’t bother with using a base score to determine your rate. However, they may use one if you have no auto score yet.

If they are using Equifax to determine your loan, they are likely using Auto Score 8 and 5 to determine your rate. Like Experian, they are likely to ignore your base FICO score unless needed.

That said, some credit score companies will send your base FICO score to lenders. TransUnion is known to use the base FICO Score 8 with auto lenders to expand on Auto Score 8 and 4 results. All of these different FICO score numbers are probably confusing to understand.  However, they aren’t as baffling as they seem.

They mostly indicate the various versions or scoring methods used over the years. The most trusted version for both auto and base scores is eight. That said, some lenders still use two, four, five, and nine to check on older loans. The differences between these various FICO scoring methods aren’t vast enough to be concerning.

It is still essential, though, to understand when a lender uses an auto or a base score. As indicated above, most lenders are likely to use an auto score to gauge your trustworthiness.

That said, if you are concerned about your auto credit scores and the variables behind them, you can always purchase an Auto Enhanced FICO Scores report to understand them better.

Where You Can Find Auto Enhanced FICO Scores

The following credit score companies will provide you with a multitude of Auto Enhanced FICO Scores:

  • Equifax – Auto Score 5, 8, and 9
  • Experian – Auto Score 2, 8, and 9
  • TransUnion – Auto Score 4, 8, and 9

Purchasing a detailed auto credit report from these companies will give you a better understanding of your score and how it is determined. They will showcase why you have a 650 score and what you can do to improve your rating and get a better car loan.

Using This Information to Improve Your Loan Quality

Don’t automatically trust the auto lender if they use your 650 credit score to set an unfair interest amount. Instead, grill them a little on what credit reporting agencies they used and how they determined your rating. It is important to take this step because you may be able to force them to use more enhanced methods and could find a report that is more beneficial to you.

For example, you should ask them right away if they used FICO Auto Enhanced Scores or just regular FICO credit scores. This question will surprise them and show them that you are more knowledgeable than most car buyers.

As a result, they are less likely to try to give you a higher-interest loan because they know you grasp the nature of credit scores more fully. Even better, it may force them to search multiple reports and find one that showcases your credit in a positive light. You should then ask questions like:

  • What is the minimum score needed to get approved for a loan?
  • What is the minimum score needed to get the best rate on loan?
  • What other factors go into deciding on a loan?
  • Can you tell me what auto scores were used to decide on my loan?
  • Did your FICO reporting agency send you my base score or just my auto scores?
  • In the past, have you loaned to someone who had my credit score?
  • What was the best rate someone with my score received?
  • What can I do to get a better rate from you?

Questions like these help keep you informed on the loan process and give you a better understanding of your credit scores. Just as importantly, they force the auto lender to explain their process transparently.

This action may make some of them uncomfortable and make it easier to negotiate a better deal on your car. The unique nature of your 650 credit score will only complicate things even further. While it does give you a lot of bargaining room, as your credit has the potential to improve, it can make things harder by causing some doubt in your lender’s mind.

Understanding these concerns is crucial to ensuring they don’t severely damage your chances at high-quality auto loans.

Other Difficulties That Can Complicate Your 650 Credit Score Car Loan Process

One concern that those with a 650 credit score may have when buying a car is a higher interest rate. While we will discuss that problem in more depth in a section below, it is worth briefly mentioning here.

You are going to pay a higher interest rate than someone with an 800 credit score. There’s simply no way around it. This fact can complicate the process and force you to buy a cheaper car.

Other problems that can complicate this process include suffering from a vehicle repossession or bankruptcy that affected your car in the last two years. These situations will seriously change your interest rates before buying a vehicle.

Both of these conditions are likely to decrease your auto loan score and make it more difficult to find a car. Those with a 650 credit score likely have one of these problems on their record already, making it more difficult for them to buy a car.

You may also run into a lender that isn’t willing to take a chance on someone with a 650 credit score. This fact may force you to look for a bad credit lender, even though you have fair credit.

Getting a loan from a poor credit firm is frustrating because they can set an interest rate that seems nearly usurious. Prices as high as 10-15 percent are not uncommon levels when borrowing from these lenders.

Those kinds of interest rates are the main problem you’re going to run into having a 650 credit score. While you shouldn’t have a hard time finding someone to lend you money, they may set rates that will cost you a lot of money in the future.

Let’s showcase this problem by detailing two different lending scenarios with varying rates of interest. In this way, you can better understand how problematic a 650 level is when buying a car.

The Ways Auto Credit Scores Influence the Money You Pay

One of the most important things to understand about auto loans is how your credit scores influence the money you pay over the life of a loan. Unfortunately, someone with a 650 credit score is going to pay more than someone with an 800 rating.

Let’s break this down to give you an understanding of just how much your credit score can affect this payment cycle. We’ll start by examining a typical loan payment cycle with a 650 credit score. Then, we will showcase the payment cycle of someone with 800 credit. We will then end this section with an examination of how much more you will pay with a 650 credit score and move on to talk about ways to improve your credit to avoid this problem.

A 650 Credit Score Car Loan Repayment Schedule

Let’s say you buy a $15,000 auto with a 650 credit score. Your lender talked you into a $5,000 down payment and applied an interest rate of eight percent over seven years. This interest rate will be applied to the amount you owe every year and will be split between your monthly payments.

Let’s break this down into bullet points to simplify your understanding of this payment process:

  • The amount you owe on loan – $10,000
  • Your total payment cycle – Seven years or 84 monthly payments
  • The interest rate that was set – eight percent per year or $800 more every year
  • Your monthly payment before adding the interest amount – $10,000 divided by 84 or about $119 per month
  • The interest rate payment that you owe on the car – around $67 per month
  • The monthly payment you make after the interest is added – $119 plus $67 or $186 per month
  • What you pay every year – $2,232
  • The amount you pay over the life of the loan – $15,624

When you add the $5,000 you already spent as a down payment, you paid $20,624 for a $15,000 car. This simple calculation ignored other factors that can influence your car payment and is designed to highlight how your 650 credit score impacts your car payments. As a result, you may spend a little bit more than is indicated here.

An 800 Credit Score Car Loan Repayment Schedule

Let’s use the same $15,000 car buying scenario with someone who has an 800 credit score. While the lender asked for a lower down payment than the person with a 650 score, the buyer still paid $5,000. The lender then set the interest rate at just five percent.

The following calculation will show that they pay a lot less over the life of the loan:

  • The amount you owe on loan – $10,000
  • Your total payment cycle – Seven years or 84 monthly payments
  • The interest rate that was set – five percent per year or $500 more every year
  • Your monthly payment before adding the interest amount – $10,000 divided by 84 or about $119 per month
  • The interest rate payment that you owe on the car – around $41 per month
  • The monthly payment after the interest is added– $119 plus $41 or $160 per month
  • What you pay every year – $1,920
  • The amount you pay over the life of the loan – $13,440

In this scenario, the person with an 800 credit score paid around $2,200 less for their vehicle. Even with the initial $5,000 down payment, they only paid $18,440 for their vehicle over the life of their loan. This difference is at least one car payment less than someone with a 650 credit score.

The Importance of Improving Your 650 Credit Score

Imagine what you could do with the extra $2,200 you could have saved over that seven-year lending period. You could have gone on a vacation to Acapulco or visited Europe for a few weeks. That’s why it is so essential to take steps towards improving your credit score.

Thankfully, you can boost your score from 650 more quickly than you’d think.

Improving Your Credit Score Right Now

Being right on the threshold with a 650 credit score requires taking a few steps to improve your credit score immediately. Thankfully, there are steps that you can take today that will boost your credit score more than a few points. While these aren’t miracle cures for a confusing credit situation, they can help you get the kind of score you need to get a high-quality car.

These tips can also help to set you up with a long-term plan for managing your credit. It is never too late to start carefully addressing this financial situation and to take steps to pull your credit out of the fair range and into the good.

Start With a Free Credit Report

You have probably seen or heard advertisements for free credit reports. While these ads can be a little cheesy, they are showcasing a valuable service.

Checking your credit score can help improve your rate by helping you spot errors and mistakes that decrease your score. You can dispute these errors and improve your rate quickly and efficiently.

After checking your score, make sure that you sign up with a credit tracking company that will spot potential errors and work to address them. What is particularly lovely about this step is that most credit bureaus are likely to boost your score by a point or two just because you checked.

That’s because they see that you are taking it more seriously and are looking to manage your credit.

Make Your Payments on Time

We really can’t stress this point enough. When you make your payments on time, you show lenders that you are a trustworthy and reliable person. You also showcase that you are capable of handling your finances without difficulty. We also suggest setting up payment reminders. This step is particularly useful because these reminders will let you know when your payment is due and help you avoid mistakes.

Even better, most companies will let you set up an automatic payment cycle. We suggest creating one with a payment that is worth more than your minimum payment. Paying at least $50-$100 more than your minimum amount shows lenders you are financially stable, improves your credit score and pays debts off more quickly. It also saves you money over the life of that loan.

Reduce What You Owe

If you have a nest egg saved up, use it to pay off some credit cards and other types of debt. While it might be hard to see your savings dry up a little, it is an important decision. That’s because you will reduce your amount of debt and increase your available credit. This step will boost your credit score and impress lenders by showing your financial stability.

Even if you can’t pay all of your debts off like this right away, set up a payment plan that dramatically reduces your liability, we already discussed paying more than your minimum payment. However, it is essential to focus this higher payment on higher-interest cards. Pay these off first and then move on to others to reduce your debt significantly.

Long-Range Credit Management Tips

While the tips above are the quickest way to improve your credit score, you need to invest in a long-range plan for improving your credit. The following tips are typically the most effective:

  • Decrease your number of credit cards by focusing debt on a few accounts.
  • Only open a new credit card when necessary.
  • Talk to a credit counselor to get your affairs in order.
  • Consider a consolidated loan to focus your credit in one spot.
  • Understand that a closed credit account doesn’t go away – it stays on your score for at least seven years.
  • Make sure that you continually work to pay your bills on time.

These simple tips are steps that just about anybody can manage. We strongly suggest talking to a credit counselor if you are at the 650 credit range. They can help you take steps to avoid dropping below this rate and can boost your score more quickly than you could on your own. This decision can help you get the dream car you’ve desired all these years.

Working With a 650 Credit Score

The tips above should help your credit score poke out of the 650 range and into a more impressive one. At this point, you should have less difficulty getting an auto loan that meets your needs and provides you with the kind of vehicle you need to live your life. However, your score may hover around 650 based on other factors that are harder to control.

As a result, you need to be ready to work with your auto lender and find ways to compromise on your loan. You may be able to haggle the interest rate down a little bit by spending more on a down payment. This step will impress a lender and make them more likely to decrease your interest rate. It can also lower your payments and reduce your repayment cycle.

You may also want to consider investing in a car that isn’t quite your dream model. Everybody has that dream car that meets all of their needs. While you deserve that kind of car, you might not be able to afford it with a 650 credit score right now. However, that doesn’t mean you can’t get it in the future. Buy a car that you can afford and make all of your payments on time for several years.

This process will slowly, but inevitably, increase your credit score out of the 650 range. Even better, it will affect your auto FICO score and make dealers more likely to work with you on a car. After about three or four years of on-time payments, your score should improve enough to make it easier for you to buy that dream car you’ve always wanted.

Patience is critical when buying a car and managing your base and auto FICO scores. While the tips above will improve your credit, sustained investment in long-term improvement is essential for breaking out of the 650 credit range and getting the kind of cars that you deserve. Don’t hesitate to talk to a car loan specialist to learn more about this process.

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About the Author

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Michael launched Your Money Geek to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.

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