Getting approved for an auto loan with a credit score of 510 can be challenging, but it is possible with the right strategy. A credit score below 600 is considered poor or bad credit by most lenders. However, there are some options to get financing with 510 credit or even lower.
What does a 510 credit score mean?
A credit score of 510 according to FICO and VantageScore models falls under the ‘Very Poor’ classification. This means you have a limited credit history with negative items like late payments, collections, bankruptcies etc. Some key points about a 510 credit score:
- It is below the average credit score of 695
- Very difficult to get approved for conventional auto loans
- High interest rates from subprime lenders
- Higher chance of application denial
With such a low score, most mainstream auto lenders would consider you a high-risk borrower and would likely decline your application for financing. But some special finance, buy here pay here, and subprime lenders may still work with you.
Minimum credit score requirements for auto loans
Here are the general credit score requirements for auto loans from different types of lenders:
| Lender Type | Minimum Credit Score |
|---|---|
| Prime Lenders (banks, credit unions) | 660 – 700 |
| Non-prime Lenders | 600 – 659 |
| Subprime Lenders | 500 – 599 |
| Buy Here Pay Here (BHPH) Dealers | 450 – 599 |
As you can see, 510 credit score holders may qualify with Subprime lenders and BHPH dealers. Prime and non-prime lenders will most likely reject your application.
Getting a car loan with 510 credit score
Here are some ways you can improve your chances of getting approved with a credit score of 510:
Apply with subprime lenders
Subprime lenders provide financing to borrowers will poor credit, usually in the 500-599 range. Interest rates are higher compared to prime lenders to offset the added risk, often in the 15-25% range. Some examples of national subprime auto lenders include:
- Capital One
- Credit Acceptance
- Westlake Financial
- Santander Consumer USA
You can apply directly with these lenders or they may work indirectly with car dealers in your area. Be prepared to pay higher rates and put down at least 10-20% as down payment.
Shop at Buy Here Pay Here dealers
Buy here pay here (BHPH) dealers offer in-house financing to borrowers with low credit scores. They focus less on your credit and more on your ability to make the monthly payments. BHPH loans allow scores as low as 450. Key things to know:
- Down payment of 25-30% is common
- Higher interest rates than subprime loans
- Weekly or bi-weekly payment schedules
- GPS tracking and remote disabling devices to repossess if you default
BHPH dealers cater to local communities only. Search online directories like www.bhphinfo.com to find dealers near you.
Bring a cosigner
Adding a cosigner with good credit can improve your chances significantly. Their solid credit score balances out your poor score. Make sure they understand their obligation if you stop paying the loan. Some key cosigner tips:
- Cosigner should have a 700+ credit score
- Not your spouse – lenders see married couples as interlinked financially
- Get them pre-approved before applying for the auto loan
- Cosigners are equally liable for the loan payments
Having a cosigner may help you qualify for a better interest rate as well. Shop around with major banks and lenders if you can get a cosigner.
Improve your credit first
If your credit is severely damaged, taking some time to improve it may open up better loan options. Here are some tips to raise your credit score quickly:
- Pay down credit card balances – lower utilization helps
- Dispute and remove any errors on your credit reports
- Become an authorized user on someone else’s credit card
- Limit new credit applications until after your auto loan
- Avoid missing payments or more negative marks
Monitor your credit scores closely. Once they reach the mid-500s, you’ll have many more lender and financing options available.
Try dealer financing
Many small independent dealers work with local banks and credit unions to offer financing to their customers. These localized lenders may be more flexible than big banks with credit requirements. Dealer financing options to look into if you have 510 credit:
- In-house dealer financing – the dealer themself provides the loan
- Indirect dealer financing – dealer sources financing through partnerships with lenders
- Credit unions – may offer affordable financing to members
- Community banks – check small local banks for auto loans
If shopping at a dealership, ask them upfront what financing options work best for your credit score range.
Auto loan terms with 510 credit
Here are some common auto loan terms you can expect when financing with a 510 credit score:
- Interest rates – Expect rates between 15% – 25% with subprime lenders or BHPH financing. Lower rates around 10% may be possible with a good cosigner.
- Down payment – Plan for at least 10% down, ideally 20% or higher. This reduces the risk for the lender.
- Loan term – Loan terms of 36 – 60 months are common. BHPH dealers may structure terms out to 72 months.
- Car value – Your loan amount is limited to a percentage of the car’s value, usually 100% to 140%. Older or high mileage cars qualify for less.
A higher down payment, shorter loan term, and lower car price will make getting approved much easier with a credit score of 510.
Finding the right 510 credit score car loan
Shopping around for the best possible auto financing will require some legwork with a 510 credit score. Here are some tips:
- Get pre-qualified – Many lenders let you check rates without a hard credit check.
- Compare multiple lenders – Apply with several lenders to compare loan offers.
- Read all terms – Don’t just look at monthly payments. Check interest rates, fees, loan length as well.
- Inspect used cars carefully – Have a mechanic check any used car before purchasing.
- Negotiate fair pricing – Research car values and negotiate the best deal.
While a 510 credit score makes getting a car loan much harder, having a solid application with income, down payment, and a reasonable car purchase can improve your chances substantially. With some persistence, getting approved for auto financing is possible even with poor credit.
Conclusion
A credit score of 510 makes qualifying for conventional auto financing difficult, but there are still options available. Subprime lenders and buy here pay here dealers offer loans to borrowers with credit in the 500s. Coming up with a large down payment, finding a good cosigner, and shopping with local dealer and credit union financing sources can help overcome low credit. While interest rates will be higher, with the right strategy it is possible for someone with a 510 credit score to get a car loan.