Can I Get a Car Loan With a Credit Score of 720?

Buying a car is an exciting milestone in life However, as you start shopping around, you may find that your credit score plays a big role in determining whether you can get approved for an auto loan, and what interest rate you will pay If your credit score is 720, you may be wondering if that is good enough to get a car loan.

The short answer is yes – a credit score of 720 is generally considered excellent, and should allow you to qualify for the best rates on a car loan However, there are a few key factors that determine your chances of approval and how much you will pay Let’s take a closer look at what goes into a credit score, and how a 720 score stacks up when applying for auto financing.

What Is a Good Credit Score for an Auto Loan?

There is no single credit score threshold for qualifying for a car loan. Rather, most lenders group applicants into credit “tiers” that determine eligibility and interest rates. Here is how the tiers usually break down:

• Exceptional (760-850) – The best rates and lowest borrowing costs.
• Very Good (700-759) – Qualifies for most loans at very competitive rates.
• Good (660–699) – Most lenders will approve loans with decent rates.
• Fair (620–659) – Loan approval possible, but interest rates will be higher.
• Poor (580-619) – Getting approved will be challenging and expensive.
• Very Poor (500-579) – High chance of denial unless you find subprime lenders.

As you can see, a credit score of 720 puts you in the “Very Good” credit range. This means you should have access to competitive interest rates from prime lenders. While it’s not high enough to get the absolute lowest rates, a 720 credit score is well above the thresholds for approval at major banks and dealerships.

Factors That Impact Your Chances of Loan Approval

When you apply for an auto loan, lenders look at your entire credit profile – not just your score. Here are some key factors they consider:

• Credit history length – In general, a longer history of managing credit is better. If you have limited credit history, it may impact approval odds.

• Types of credit – Lenders like to see experience with different types of credit, including installment loans, mortgages, and revolving accounts like credit cards.

• Too many “hard inquiries” from applying for many loans at once can raise red flags and temporarily lower your score.

• Outstanding debt – Lenders will analyze your debt-to-income ratio and may be wary if you have high balances on other debts.

• Payment history—Paying all of your bills on time shows that you are a low credit risk.

The good news is a credit score of 720 indicates you likely have positive marks in most of these categories. As long as you don’t have red flags like recent missed payments, maxed out cards, or excessive debt, you should be in good shape.

Interest Rates to Expect with a 720 Credit Score

The higher your credit score, the lower the interest rate lenders will offer on your auto loan. With a score of 720, here are some average rates you can expect to see:

• New car loan – Interest rates around 4-5%, depending on the lender and loan terms.

• Used car loan – Interest rates around 5-7%. Rates are typically 1-2% higher for used vehicles.

• loan term of 36 months – Rates will be lower for shorter loan terms You may see 3-4% APR.

• 60-month loan term – 5-6% is common for longer 5-year loans.

• 72-84 month loan terms – Maximum loan lengths allow 6-7% rates for well-qualified buyers.

While rates vary between lenders, the benchmarks above are reasonable based on average new and used car rates. Of course, the exact rate you are offered will depend on the lender’s policies and loan specifics like your down payment, loan amount, and term length.

Rates are also dynamic and tend to fluctuate over time along with broader economic conditions. When benchmark rates like the Prime Rate are low, auto loan rates will be lower as well.

Tips to Boost Your Chances of Approval

If your credit score is right around 720, here are some tips that can improve the odds of getting approved:

• Look for lenders that use “FICO Auto Scores.” These unique scores give your car credit history more weight, which could help you get a loan.

• minimize credit inquiries in the 90 days before applying.

• Pay down balances on credit cards and other revolving accounts.

• Boost your down payment amount to lower the requested loan size.

• Choose shorter loan terms, which reduce lending risk.

• Bring a co-signer with better credit if needed. Their income and score can offset any weaknesses.

• Provide verification of your income and assets to show you can afford the payments.

Taking some of these steps before you apply can help compensate if your score falls just shy of prime loan qualifications.

Alternatives if You Can’t Get Approved

If you have a credit history issue that sinks your score below 720, don’t lose hope. Here are some options to get financing with credit challenges:

• Apply at local banks or credit unions – They may be more flexible than large lenders.

• Explore “second chance” financing that is designed for borrowers with past credit problems.

• Consider “buy here pay here” dealer financing as a last resort – But expect very high rates.

• Get a co-signer with better credit to jointly apply for the loan.

• Build your score and reapply in 6-12 months after demonstrating improved credit habits.

While approval may be harder, persistence and exploring all your options can still lead to success in getting a car loan with credit challenges. Just be prepared for higher rates until you build your score back up.

The Bottom Line

A credit score of 720 is generally considered “Very Good” by most standards. It shows lenders that you are a low-risk borrower who makes payments on time and manages debt responsibly. With some basic good financial habits, you should be able to qualify for an auto loan with competitive rates in the 4-7% range from most major banks and dealerships. While not good enough for the absolute lowest rates, a 720 FICO score puts you well within the “approved” zone for auto financing as long as the rest of your credit history is positive.

Yes, a credit score of 720 is generally considered a good credit score for buying a car.

A 720 credit score, considered a “good” score, can offer you several advantages when applying for loans and credit cards. You can expect better interest rates, higher credit limits, and more favorable terms on loans such as mortgages and car loans.

Average auto loan interest rates by credit score

While there isn’t a strict minimum credit score to buy a car, a score of 600 or higher is generally recommended for better loan terms and interest rates. Lenders often use FICO Auto Scores (ranging from 250-900) or VantageScores (ranging from 300-850) to assess risk.