SoFi

Financing a car can help you build credit, as long as you manage the loan responsibly and the loan’s activity is reported to one of the major credit bureaus.

Like with most other debt obligations, responsibly making on-time payments can help your credit score. However, making late or missed payments can hurt your credit score, as can the hard pull of your credit report that potential lenders conduct when you apply for an auto loan.

How Does Car Financing Work?

While it is possible to pay for a new car with cash, it’s common for many potential auto buyers to use car financing. You may get a car loan for the full purchase price, or make a down payment and get a loan for the rest of the amount.

The lengths of car loans vary but are commonly between 24 and 96 months, with six years (72 months) being the average. After making your payments for the balance of the loan, the loan is paid off and you take full ownership of the car.

Note that your car acts as collateral for an auto loan. This means that if you fail to repay the amount borrowed, the lender can take your car to recoup its losses.

Recommended: When Are Credit Card Payments Due?

How Financing a Car Can Affect Credit Positively

Most car loans are reported to the major credit bureaus, and your payment history and balance is usually included on your credit report. Making on-time payments on your car loan can have a positive impact on your credit. Potential lenders want to see a history of reliably paying your debts, and making payments on a car loan can help with establishing that.

Another factor that makes up your credit score is having a healthy mix of different types of credit. This can be another reason why having an active auto loan can help build credit, as it adds to the types of credit you have.

How Financing a Car Can Affect Credit Negatively

Just as making on-time payments on your car loan can have a positive impact on your credit score, missed or late payments can affect your credit negatively.

Additionally, when you initially apply for an auto loan, the lender will conduct a hard pull on your credit report to verify your creditworthiness. This can drop your credit score by a few points, though those drops usually only last a few months. If you’re working with multiple lenders, keep in mind that hard credit pulls by multiple lenders in a short period of time will usually get combined so it appears as a single inquiry.

And while paying down debt is often a good idea, paying off a car loan affects your credit in some additional ways. If you don’t have other debts or loans, it’s possible that paying off your loan can have a negative impact on your credit score. This is because your on-time payments no longer get reported, and you’ll have one fewer type of credit to your mix. Additionally, if you took out your car loan a while ago, paying it off can impact the average age of your open accounts, which also influences credit.

Factors That Influence Your Credit Score

The biggest factor that influences your credit score is your payment history. Potential lenders want to see that you reliably pay your debts, and making on-time payments is one way to show that. Other factors that influence your credit score are:

•   Your average age of accounts

•   Credit mix

•   How much you owe

•   How many recent inquiries appear on your credit report

Tips to Build Your Credit Score

Here are some tips to consider that can help build credit:

•   Make sure that you always pay your bills on time.

•   As you apply for new debt or credit, only apply for loans that you know you have the financial ability and discipline to pay.

•   Aim to keep your credit utilization — the amount of your total credit you’re using — at 30% or lower. Having a higher credit utilization rate can negatively affect credit.

•   Remember to check your credit report at least once a year. Not only can this help you to monitor your credit health and understand the impacts of various activities on your credit, it can help you spot any errors or fraudulent activity.

Recommended: Credit Score Needed to Buy a Car

Mistakes to Avoid When Financing a Car

One of the biggest mistakes that you can make when financing a car is applying for a higher loan amount than you can afford. When you take out a car loan, you’re making a multi-year commitment to make those monthly payments. If you take out a loan for more money than you can reasonably afford, you run the risk of destabilizing your overall financial situation and ending up in a situation where you make late payments or, even worse, miss payments.

Recommended: Average Payment for a Car

Is a Car Loan a Wise Option to Build Credit?

A car loan can be a good option to help build your credit. Remember, what potential lenders are looking for when they look at your credit report is a history of meeting your debt repayment obligations. A car loan that you regularly pay on time can be a great way of showing that you are reliable.

Also follow additional tips for getting a car loan to help give you a head start toward building your credit.

Other Ways to Build Credit

Aside from turning to car financing to build credit, here are a few other ways to build credit that you might consider.

Become an Authorized User

Another way that you can build credit is by becoming an authorized user on someone else’s credit card account. When you are an authorized user on a credit card account, you’re not financially responsible for paying the statement, but it still shows up on your credit report. Keep in mind that how the primary account holder manages their account can affect your credit score, either positively or negatively.

Recommended: Breaking Down the Different Types of Credit Cards

Consider a Personal Loan

Another option to build credit is by taking out a personal loan. Unlike a car loan, which is considered a secured loan since the car itself acts as collateral for the lender, a personal loan is an unsecured loan. That means that there is no collateral for the lender to seize if you stop making payments.

In certain situations, this can make a personal loan a great option for building credit. In fact, if an auto loan isn’t the right option, you can consider getting a personal loan for a car.

Apply for a Credit Card

Responsibly using a credit card and paying it off in full each month is another way that you can establish credit. Your credit card balance and payment history are typically reported to the major credit bureaus.

Additionally, some credit cards offer rewards, such as cash-back rewards, with each purchase. Those rewards can be a boost to your monthly budget.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?l

The Takeaway

If you take out an auto loan to buy a new or used car, it will typically get reported to the major credit bureaus. That means making on-time payments on your auto loan can help you build credit. Similarly, late or missed payments can have a negative impact on your credit score.

Applying for a credit card and making regular payments can be another way to build your credit.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Does paying off a car loan help build credit?

While making regular payments on your car loan helps you build credit, paying off your car loan doesn’t always have the same impact. When you pay off your car loan, you no longer have the monthly payment history showing up on your credit report. Still, paying off a car loan can be a good financial move since it helps lower the total amount of your debt.

How can I keep my payment within my budget when financing a car?

The monthly payment amount of your car loan will depend on a variety of factors — the total purchase price of the car, your down payment, the length of the car loan and your interest rate. If you want to keep your monthly payment below the average payment for a car, you can get a cheaper car, make a higher down payment, or take out a longer loan. You can also work on building your credit score to hopefully qualify for a lower interest rate.

How fast can a car loan raise my credit score?

While taking out a car loan can possibly build your credit, you shouldn’t count on an immediate positive impact. In the short-term, it’s possible that your credit score may decrease from the new credit inquiries and the additional debt that shows up on your credit report. However, over time, making regular and on-time payments on your auto loan could build your credit score.

Does leasing a car build credit?

Most lease payments are reported to the major credit bureaus. That means that regular, on-time payments can help you build your credit in a similar manner to buying a car with a car loan. However, if you make late payments or miss payments on your lease, it can have a negative impact on your credit score.

---

Photo credit: iStock/Zorica Nastasic

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 .

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q424-009

Read more

A check hold is the period of time that your bank or credit union hangs on to your check before the funds are released and available in your account. Check holds allow both the sending and receiving financial institutions time to validate a check.

It might seem annoying to have to wait for your money, but the process can help avoid check fraud and bounced checks, which can sometimes result in fees to the account holder. Fortunately, check holds are governed by laws that limit most such holds to two business days (though there are some exceptions, explained below).

Here’s what you need to know.

How Does a Check Hold Work?

When your bank receives a check — be it through the mobile deposit feature on its app or at the physical bank branch — it doesn’t necessarily receive the full credit for the dollar amount on the check. Instead, many checks must first go through the Federal Reserve’s central clearinghouse. This can contribute to a situation in which a check is on hold.

Only after this process is complete does the recipient bank have full access to the funds.

Although some checks may clear immediately, others may not, which means the account holder cannot yet dip into those funds. In some cases, you may have access to a portion of the money you deposited to your checking account, but not the entire check amount, until the hold ends.

In terms of timing, most “local” checks (i.e., those deposited into a United States financial institution, from a United States financial institution) must clear within two business days. There are, however, some exceptions.

Reasons for Check Holds

Banking processes may require holding a check for a variety of reasons, including mitigating the risk of check fraud. Here’s the scoop.

Risk Mitigation

While check fraud is no longer as common as credit card fraud (likely because checks themselves are used less often), it can happen. Forged signatures, “paper hanging” or “kiting a check” (purposefully writing a check without sufficient funds), and plain old counterfeiting are all ways checks can be risky for both banks and their customers. Having a check on hold means there’s more time to review and verify it. This, in turn, mitigates the risk of attempts at bank fraud.

Regulatory Compliance

As mentioned above, some check holds are actually related to the Federal Reserve’s clearing process, as opposed to a policy written by the bank itself. In those cases, the check clearing process may be, quite literally, out of the bank’s hands.

Bank Policies

Individual banks may have their own policies on the books as far as how long to hold different types of checks internally. Of course, such policies are subject to the laws that limit check holds, described below.

Check Hold Time Frames

Thanks to the Expedited Funds Availability Act of 1987 (also known as the EFAA), most checks written in the United States must be cleared within two business days. However, in some cases, the time frame may be extended to six business days, including instances where the check is “non-local” (i.e. is being deposited from a foreign financial institution).

The same law requires banks to disclose their funds availability policies to account holders, so if you ever have a question about when your check should clear, you should be able to contact your bank and get an answer. This can help you understand why a bank might hold checks for a few days.

Recommended: What Is a High-Yield Checking Account?

Typical Hold Periods

The longest you should have to wait for a check hold to clear is about a week.

As mentioned, most “local” checks must clear within two business days, and some may clear more quickly than that. For instance, direct deposit checks often clear by the next business day, as do cashier’s checks and checks that were written from a different account at the same financial institution.

On the other end of the spectrum, if your account is newer, the check is in a large amount, or is being issued from a non-local bank, the hold may extend up to six business days.

Recommended: 50/30/20 Budget Calculator

Factors Affecting Check Hold Duration

While most check holds clear within a business day or two, there are certain factors that may extend the time it takes for your funds to hit your account. These include:

•  Account history. Those with newer accounts may be subject to longer hold times during the first 30 days of account ownership as the bank works to verify both your identity and the validity and availability of incoming funds.

•  The check amount. Larger checks (defined as totaling more than $5,525 in a day) may be subject to longer holds on the amount over the $5,525 mark, though federal regulations require banks to make at least part of the funds available to you within the normal hold time.

  Generally speaking, the first $225 of most checks must be available the next business day, even if the remainder is still subject to a hold.

•  The source of the check. Checks from foreign banks may be subject to holds of up to six business days.

•  Your bank’s policies. As noted, your financial institution — whether a traditional vs. an online bank — is typically required by federal law to list their funds availability protocols in a prominent place — and a bank representative should be able to answer any questions you have about when a check might clear.

These factors can play a key role in how long a check is on hold for.

The Takeaway

While check holds may feel like an inconvenience, they’re a safety measure that can benefit both you and your bank. They allow banks to verify deposits. In most cases, the funds will be available in just one or two business days. In some cases, a hold of up to six business days is possible.

Looking for a bank account that makes managing your money easy? See what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What is the maximum hold period for a check?

In compliance with federal regulations, holding a check usually cannot last longer than six business days. However, if the bank has reason to suspect fraud or your checking account is brand new, longer check hold times may be deemed “reasonable.”

Can a bank hold a check indefinitely?

No. Banks are subject to federal regulations that limit most check holds to two business days, though in some cases the hold period may extend to six business days. While longer holds are possible under certain circumstances (such as a new account or suspected fraud), the bank still must clear your funds once verification is complete.

How can I avoid check holds?

Directly deposited funds generally clear on the next business day, so signing up for direct deposit with your employer is a good way to avoid check holds on your regular paycheck. For other checks, if the amount is larger, you might ask for a certified or cashier’s check, each of which tends to clear more quickly.

---

Photo credit: iStock/FG Trade

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

SOBNK-Q324-116

Read more

If you’re in the market for a new car and are comparing financing options, it may be helpful to know that leasing a car can help you build credit. The big “if” is that this typically only applies if you manage the lease responsibly, paying your debt on time.

In most cases, you’ll need to have good credit to qualify for a lease on a car. If you have poor or no credit, you may have better luck getting an auto loan, although your interest rate may be high. Whether you opt to lease a car or buy one with an auto loan, your payment history is usually reported to the major credit bureaus. As such, making on-time and regular payments can help build your credit.

Leasing vs Buying a Car

When you buy a car, you agree on a purchase price with the seller. You then can either pay for the full amount of the car at the time of purchase or use an auto loan for some or all of the purchase amount.

With a lease, you may put some money down, and then you will pay a fixed amount each month for the duration of the lease. Your monthly lease amount will be based on how much the car is worth at the end of the lease period.

At the end of your lease, you can either return your vehicle to the lessor or buy your leased car.

It’s also important to keep in mind that leasing a car often comes with some restrictions on how you use your car, which is not the case with buying a car. If you lease, you might have limits on the number of miles you can drive during the lease term, for instance.

Both buying and leasing a car can impact your credit score, since your monthly debt obligation and your payment history (positive or negative) are usually reported to the big three credit bureaus and show up on your credit report. A car lease is typically reported as it’s considered an installment loan.

Recommended: Does Applying for a Credit Card Hurt Your Credit Score?

Pros and Cons of Leasing a Car

Beyond knowing whether leasing a car builds credit, it’s important to be aware of the pros and cons of leasing a car. By understanding the upsides as well as the drawbacks, you’ll be better able to choose between leasing or buying a car.

Here’s an overview of the major pros and cons of leasing a car to consider:

Pros	Cons
Leasing can often offer lower monthly payments than buying the car outright.	There may be restrictions on how you use the vehicle, such as the number of miles you can drive during the lease.
You can potentially upgrade your car every few years.	You don’t actually own the car, so you won’t build any equity to show for your monthly payments.
The lease may include coverage for maintenance and some repairs.	You may get charged for excessive wear and tear on the vehicle.

Recommended: What Is a Charge Card?

Ways Leasing a Car Builds Credit

In most cases, your lessor will report the payments you make on a leased car to the major credit bureaus. This means that a car lease will show up as what’s on your credit report as an installment loan, and your payment history will be recorded. This can help your credit if you make on-time payments, but it may have a negative impact if you miss a payment or the lease becomes delinquent.

Recommended: When Are Credit Card Payments Due?

Can You Lease a Car With Bad Credit?

The exact credit score needed to lease a car will depend on the lender or lessor that you use, but you generally will need to have good or excellent credit (meaning 670+) to qualify for a lease. If you don’t have a good credit history or are still working on improving your credit, leasing a car may not be the right fit for you.

When credit is extended to those with a lower score, it can be associated with a higher rate of car repossessions, meaning the lessee defaulted on the loan.

Alternatives to Leasing a Car

If you’re not able to or don’t want to lease a car, you do have some other alternatives.

Buying a Car With an Auto Loan

You might qualify more easily for a car loan rather than a lease if your credit isn’t great. While your monthly payment may be higher with a purchase as compared to a lease (since you’re buying the car rather than just leasing it for a short period of time), that may still end up being the right option for you.

You will want to keep in mind that auto loan interest rates often vary depending on your credit score. That means that someone with fair credit will likely have a higher interest rate than someone with good or excellent credit.

Recommended: Understanding Purchase Interest Charges on a Credit Card

Using a Cosigner

Another possibility if you can’t qualify for a lease is to use a cosigner. If you have a trusted friend or family member with good or excellent credit who is willing to cosign on your auto lease, you may stand a better chance of getting approved.

When you use a cosigner, the potential lessor can use the credit score and profile of both the primary applicant and the cosigner in determining whether to approve the lease.

Making a Large Down Payment

If you’re able to, you might consider making a large down payment as part of your auto lease. While you still may not be approved, providing a large down payment shows the potential lessor that you are serious and committed. Making a large down payment also will lower your required monthly lease payment, which may help you get approved as well.

Tips for Building Your Credit for the Next Lease

If you want to build your credit to prepare for your next car lease, there are a couple of things you can do:

•   Improve your overall financial situation. For one, you can work on solidifying your finances overall, including setting up a budget and paying down debt. Remember that owning a car means you have to pay not only for your monthly car payment but also auto-related expenses like repairs, gas, and car insurance.

•   Use credit cards responsibly. Responsibly using credit cards is another way to improve your credit profile. Make sure you’re paying off your monthly statement in full each and every month.

The Takeaway

Leasing a car can build credit in much the same way as taking out an auto loan. When you lease a car, it is reported as an installment loan on your credit report. Your payments (either on-time or late) are also reported to the major credit bureaus and can have a positive or negative impact on your credit score, depending on how you manage your debt.

If you’re looking to build your credit profile, another path to consider might be a credit card.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Does leasing affect your credit score?

Yes, leasing can affect your credit score, since activity is usually reported to the major credit bureaus in a very similar way to an auto loan. A lease will be reported as an installment loan, and your payment history will be included on your credit report. That means that regular and on-time payments can help build your credit score, while late payments or delinquencies can hurt your credit score.

Can I lease a car with a low credit score?

Generally, potential lessors are looking for lessees with good or excellent credit. There are a variety of reasons for this, including a higher rate of delinquencies or car repossessions associated with less favorable credit. If you have a low credit score, you may not be able to qualify for a lease and may need to consider alternatives.

What is the minimum credit score I can lease a car with?

The exact minimum credit score that you’ll need to lease a car will depend on a variety of factors. These include the specific lessor you’re working with, the car you’re considering leasing, and your overall financial situation. Many lessors are looking for people with good or excellent credit, meaning 670 or higher. If your credit is below that, you may not be able to qualify for a lease.

---

Photo credit: iStock/EmirMemedovski

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q424-001

Read more

As of the second quarter of 2024, the average car loan interest rate for a new car is 6.84%. The average interest rate for a used car is 12.01%. This is across all credit scores and loan terms.

However, the averages change quite a bit when broken down by credit score, loan term, and new vs. used car loans. Here’s what auto loan interest rates you can expect, why they vary, and what you can do to get a better interest rate for your next car loan.

Average Used Car Interest Rates by Credit Score

The average auto loan interest rates based on credit score, collected by Experian in the Q2 2024 “State of the Automotive Finance Market,” are as follows:

Credit score	New car interest rate	Used car interest rate
Super prime (781 to 850)	5.25%	7.13%
Prime (661 to 780)	6.87%	9.36%
Near prime (601 to 660)	9.83%	13.92%
Subprime (501 to 600)	13.18%	18.86%
Deep subprime (300 to 500)	15.77%	21.55%

Recommended: What Is the Starting Credit Score?

Factors That Affect Auto Loan Interest Rates

It helps to understand what factors affect auto loan interest rates. If you understand these, you may be able to make choices that can secure a lower APR on your next car.

Credit Score

Your credit score is a key factor in what interest rate you’ll qualify for on an auto loan. The better your score, the better interest rate you can get.

Lender

Lenders play a big role in auto loans, largely due to the financing incentives offered on new car loans. If you’re able to take advantage of zero or low-interest financing, that might be the way to go. Just be sure to negotiate the price of the car before you talk payments with the dealer.

Amount Borrowed

A larger down payment means you’ll borrow less and possibly qualify for a more favorable interest rate.

Length of the Loan

Shorter loans have lower interest rates for new vehicles, but that doesn’t always hold true for used car interest rates. According to Experian data for 2024, here’s the average car loan interest rate based on the length of the loan:

Term	New car interest rate	Used car interest rate
Up to 48 months	3.87%	12.05%
49 to 60 months	5.04%	10.93%
61 to 72 months	6.86%	12.80%
73 to 84 months	9.07%	11.53%
85+ months	9.22%	9.81%

Economic and Market Conditions

Economic and market conditions affect what interest rates are available. When the Federal Reserve Board raises interest rates, those costs are usually passed on to the consumer (you). You’ll see higher interest rates when this happens.

If there’s a high demand for cars, such as in the years following the COVID-19 pandemic, you may see higher rates and fewer incentives, as well.

How to Get a Better Auto Loan Interest Rate

If you’re looking for a better auto loan interest rate, there are a few strategies you’ll want to try:

•  Work on your credit score. If you have time, make some moves to build your credit score. Pay down debt, get your payments on autopay, ask for a credit line increase, dispute inaccuracies, and start regularly checking your credit.

•  Look for an incentive. If you have excellent credit, you may find a dealership that offers 0% APR financing for certain models they sell. Just be careful that you’re getting a good deal on the car, too.

•  Opt for a shorter loan term. You might see lower interest rates on shorter loan terms, such as those that are 48 months or shorter.

•  Put down a larger down payment. If you’re able to put down a larger down payment, you might see a lower interest rate.

•  Shop around for a lender. Compare auto loan interest rates for your credit score at banks, credit unions, and online lenders to see which is best for your situation.

Recommended: What Credit Score Do You Need to Buy a Car in 2024?

How Often Do Auto Loan Rates Change?

Auto loans rates change with fluctuating market conditions. If the prime rate jumps, you’ll see auto loan interest rates jump for new and used car loans.

Incentives for auto loan rates can change with little notice at the dealership, so if you see a 0% interest rate, consider snagging it before the promotion expires.

How to Use Average Car Interest Rates

Average car interest rates can help show you what to expect when you get a car loan of your own. If you don’t see a rate close to the average, you may want to continue shopping around.

Average car interest rates do change based on your credit score, loan term, car make and model, dealer incentives, and whether or not you’re buying a new or used car.

Recommended: What Should Your Average Car Payment Be?

Where Are Auto Loan Rates Heading?

Auto rates are tied to the federal funds rate. When the Federal Reserve Board votes to cut rates, you may see lower interest rates on auto loans. But there are other factors lenders consider — such as delinquencies — before lowering their rates.

Car valuation company Kelley Blue Book expects to see lower APRs on auto loans by the end of 2024. They report a 1% decrease in your auto loan APR results in a 3% decrease in your monthly payment.

Ways to Get a Better Car Loan Rate

The best way to get a better car loan rate is to learn how to build credit. There’s a stark difference between borrowers with poor credit scores and those with optimal credit scores. Here’s a comparison of the average car loan interest rate by credit score for the very lowest scores to the very highest:

	New car loan APR	Used car loan APR
Super prime (781 to 850)	5.25%	7.13%
Deep subprime (300 to 500)	15.77%	21.55%

With poor credit, you’ll most likely pay the highest interest rate available. Even worse, you may not be able to get a loan. Only 0.38% of new car loans are issued to borrowers with a deep subprime credit score. Start monitoring your credit score if you’re worried about getting approved for an auto loan.

The Takeaway

You can use the average car loan interest rate to your advantage. Knowing what it is and what your credit score is can arm you with the knowledge to negotiate for the best rate based on your credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance with a money tracker.

FAQ

What APR will I get with a 700 credit score for a car?

A 700 credit score is considered prime and will receive some of the best APR offers. The average interest rate for someone buying a new car with a credit score in the 700 range is 6.87%, according to Experian’s “State of the Automotive Finance Market.” For a used car, the average interest rate is 9.36%.

What car loan interest rate can I get with an 800 credit score?

An 800 credit score is considered super prime and qualifies for the best APR offers. The average interest rate for someone buying a new car with a credit score in the 800 range is 5.25%. For a used car, the average APR is 7.13%.

What is a good APR for a 72 month car loan?

The average APR for a 72 month car loan is 6.86% for a new car and 12.80% for used. If you’re able to get a better APR than the average, you may consider that good.

Is 7% APR good for a car loan?

A 7.00% APR may be a good APR for a car loan, but it depends on your credit, loan term, and whether you’re buying a used or new car. If you have excellent credit and are seeking a new car loan, 7.00% is higher than the average 5.25% APR you could get. But if you’re buying a used car, 7.00% is a great rate.

What APR is too high for a car?

An APR is too high when it’s over the average APR for your credit score. The APR for people with poor credit averages 15.77% for new cars and 21.55% for used cars, so anything over those amounts would be considered high.

Can you negotiate APR on a car?

Yes, you can negotiate the APR (annual percentage rate) on a car loan. Start by researching current rates based on your credit score and prequalifying with different lenders. Dealers may match or beat offers to close the sale, so leverage competing rates to negotiate a better APR.

---

Photo credit: iStock/PixelsEffect

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

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 .

SORL-Q424-018

Read more

Having good credit can help you reach financial goals such as buying a car or home, or renting an apartment. If you’re in your 20s, it makes sense that your credit score may be lower than that of older friends. That’s because you have a shorter credit history, an important factor in calculating your score.

Still, you can use averages to gauge where you stand credit-wise. Credit bureaus don’t use your age to calculate your score, though there are patterns based on it. Let’s take a look at the average credit score for a 25 year old and see what it could mean for your financial life.

Average Credit Score for a 25 Year Old

While data doesn’t explicitly show the average credit score breakdowns by age, it does by age ranges. Those who are 25 fall under what are considered Gen Z, and this generation’s average FICO® credit score was 680 in 2023.

Recommended: What Is the Starting Credit Score?

What Is a Credit Score?

A credit score is a three-digit number, typically ranging from 300 to 850, that predicts your credit behavior. It shows lenders how likely you are to pay back loans on time.

Credit scoring companies like FICO and VantageScore calculate your credit score based on information from your credit history, using factors like payment history, how long you’ve had credit or accounts open, and new credit applications. The higher your score, the less of a risk you are to lenders, as it demonstrates you pay back loans on time.

Recommended: How to Check Your Credit Score for Free

What Is the Average Credit Score?

As of October 2023, the average FICO credit score for all ages was 717. The average VantageScore for all ages was 702 as of March 2024.

Average Credit Score by Age

The average credit score tends to go up the older someone is, which could be attributed to a longer credit history and opportunities to open different types of accounts. The table below shows average FICO credit scores according to Experian data from October 2023.

Age	Average Credit Score
16 to 26	680
27 to 42	690
43 to 58	709
59 to 77	745
78+	761

What’s a Good Credit Score for Your Age?

Even if your credit score is at or above the average for your age range, it doesn’t mean that it’s good or that it’ll help you reach your financial goals. A better way to gauge your credit is by using credit score ranges from FICO and VantageScore. That way, you can understand the likelihood of qualifying for credit cards and other types of loans.

FICO

Rating	Credit Score Range
Poor	Lower than 580
Fair	580 to 669
Good	670 to 739
Very Good	740 to 799
Exceptional	800 and higher

VantageScore

Rating	Credit Score Range
Subprime	300 to 600
Near Prime	601 to 660
Prime	661 to 780
Superprime	780 to 850

How Are Credit Scores Used?

Lenders use credit scores as a factor in determining whether to approve you for a loan. Your credit score provides a snapshot of your risk as a borrower and how you use credit. In many cases, the higher your credit score, the more likely you’ll be approved for loans at more competitive rates and terms. Or, you may have access to more loan products, like luxury rewards credit cards.

Factors Influencing the Average Credit Score

There are five factors that affect credit scores:

•  Payment history: This aspect of your credit score looks at whether you pay your loans on time, including accounts that may have gone to collections.

•  Length of credit history: Having a longer credit history can offer more insights into your credit behavior.

•  Credit utilization: Credit utilization is the percentage of available credit you use on revolving accounts. The more you use, the more it could seem you’re overextended on your accounts.

•  Credit mix: Scoring models look at the varieties of credit you have like mortgages, credit cards, and car loans.

•  New credit: Opening or applying for new credit accounts within a short span of time could affect your credit score.

How to Strengthen Your Credit Score

Credit scores can fluctuate over time due to a number of reasons. If your credit score is lower than you’d like, consider these best practices to build credit:

•  Set up automatic payments or reminders to help you pay loans on or before the due date

•  Keep your accounts current by paying off past due balances

•  Check your credit history reports to see what may have led to a drop in your score

•  Fix any errors on your credit reports

•  Increase your credit card limits

•  Avoid applying for new credit unless necessary

•  Keep accounts as long as possible, even if they’re not currently being used

•  Watch your credit card balances to make sure they don’t get too high

How Does My Age Affect My Credit Score?

Your age doesn’t directly affect your credit score. Instead, it’s based on factors like your payment history and the length of time you’ve had credit. The earlier you start building your credit, the more opportunities you’ll have to get a good credit score.

Recommended: How Long Does It Take to Build Credit?

At What Age Does Credit Score Improve the Most?

There’s no set age when your credit score will improve the most because it’ll depend on factors such as when you start building credit and whether you pay loans consistently on time. Older generations may have higher credit scores because they have more chances to build their credit. It’s important to focus on where you are at now and what you can do to keep building your credit.

Credit Score Tips

Aside from paying your bills on time, consider other ways you can build credit. While it may be hard to open a new loan or credit card if you have a limited credit history, you can consider products like a secured credit card. A secured credit card has a refundable security deposit that acts as your credit line. Another option is a credit builder loan, where the lender sets aside your loan funds in a separate savings account and you can access the cash once you’ve paid off the loan.

The Takeaway

While looking at the average credit score for a 25 year old may be useful to see where you stand, it’s more effective to look at your credit history to see what you can do to build your score. By regularly monitoring your score, you can see whether the actions you’re taking are helpful.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Can I buy a house with a 633 credit score?

Yes, it’s possible to qualify for a mortgage with a 633 credit score. You may be able to qualify for an FHA loan or a conventional mortgage, but potentially at a higher interest rate.

Can I buy a house with a 613 credit score?

Yes, it’s possible to buy a house with a 613 credit score, though it may limit your loan options and result in higher interest rates. FHA loans, designed for those with lower credit scores, are often a good option, but lenders may require a larger down payment.

What credit score is needed to buy a $300K house?

The credit score you need to buy a $300K house will depend on the type of mortgage you want and other factors, such as your income, available assets, and down payment.

Is 650 a good credit score?

A 650 credit score is considered fair and is slightly below the average credit score.

Is a 750 credit score good at 25?

Yes, a 750 credit score at 25 is considered excellent and indicates strong credit habits for someone in this age group. This high score can help secure favorable interest rates and better loan terms, giving an advantage in achieving financial goals.

How rare is an 800 credit score?

Less than a quarter of U.S. consumers (22%) have a credit score of at least 800. This exceptional score reflects consistent financial responsibility, including on-time payments, low credit utilization, and a long credit history.

---

Photo credit: iStock/Anchiy

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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.

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 .

SORL-Q424-027

Read more