Is 640 A Good Credit Score To Buy A Car?

A credit score of 640 is a pivotal point for car buyers. While not perfect, it's often sufficient to secure auto financing, though perhaps not always at the most favorable terms. This guide will explore what a 640 credit score means for purchasing a vehicle in 2025, detailing potential loan options, interest rates, and strategies for improvement.

Understanding Credit Scores for Car Loans

Before diving into whether a 640 credit score is sufficient for a car loan, it's crucial to understand how credit scores work in the context of automotive financing. Credit scores are numerical representations of your creditworthiness, based on your credit history. Lenders use these scores to assess the risk associated with lending you money. For car loans, these scores play a significant role in determining not only if you'll be approved but also the interest rate you'll pay, which directly impacts your monthly payments and the total cost of the vehicle over time.

The Credit Score Spectrum

Credit scores typically range from 300 to 850. The most commonly used scoring models are FICO and VantageScore. While the exact ranges can vary slightly between these models and among different lenders, they generally categorize scores as follows:

Excellent Credit: 750+
Very Good Credit: 700-749
Good Credit: 660-699
Fair Credit: 620-659
Poor Credit: Below 620

A score of 640 falls squarely within the "Fair" credit range. This means you're not considered a high-risk borrower, but you're also not in the prime category that typically receives the lowest interest rates. Lenders view borrowers with fair credit as having a moderate risk of default, necessitating a slightly higher interest rate to compensate for that risk.

Key Factors Influencing Your Credit Score

Several factors contribute to your credit score. Understanding these can help you identify areas for improvement:

Payment History (35%): This is the most critical factor. Consistently paying bills on time, including credit cards, loans, and mortgages, is paramount. Late payments, defaults, and bankruptcies can significantly damage your score.
Amounts Owed (30%): This refers to your credit utilization ratio – the amount of credit you're using compared to your total available credit. Keeping this ratio low (ideally below 30%) is beneficial.
Length of Credit History (15%): A longer history of responsible credit management generally leads to a higher score.
Credit Mix (10%): Having a mix of different types of credit (e.g., credit cards, installment loans like auto loans or mortgages) can be positive, as it shows you can manage various credit products responsibly.
New Credit (10%): Opening too many new credit accounts in a short period can temporarily lower your score, as it may indicate financial distress or increased risk.

For car loans specifically, lenders will also look at your debt-to-income ratio (DTI), which compares your monthly debt payments to your gross monthly income. A lower DTI generally indicates a greater ability to handle new loan payments.

Is 640 a Good Credit Score to Buy a Car in 2025?

To directly answer the question: Is 640 a good credit score to buy a car in 2025? Yes, it is generally considered a fair credit score, which means you can buy a car with a 640 score, but you might not get the best possible loan terms. You are likely to be approved for a car loan, but expect higher interest rates compared to individuals with good or excellent credit.

What Lenders See with a 640 Score

Lenders categorize a 640 credit score as "fair" or "subprime" in some cases, depending on their specific underwriting criteria. This means:

Approval is Possible: You're not automatically disqualified. Many lenders specialize in working with borrowers in this credit range.
Higher Interest Rates: The primary consequence of a 640 score is a higher Annual Percentage Rate (APR). This is because lenders perceive a greater risk of default.
Potentially Lower Loan Amounts: Some lenders might offer smaller loan amounts or require a larger down payment.
Shorter Loan Terms: To mitigate their risk, lenders might push for shorter loan terms, which can result in higher monthly payments.

The automotive market in 2025 is dynamic. While interest rates have fluctuated, the fundamental principle remains: credit scores are a primary determinant of loan terms. A 640 score puts you in a position where you need to be strategic about your car search and financing options.

Comparing 640 to Other Credit Tiers

To put a 640 score into perspective, let's consider what different scores might yield in the 2025 auto loan market:

Excellent Credit (750+): Typically qualifies for the lowest APRs, often below 5% for new cars and slightly higher for used. Lenders compete for these borrowers.
Very Good Credit (700-749): Still receives very competitive rates, usually in the 5-7% range for new cars.
Good Credit (660-699): Rates will be higher than very good credit, perhaps in the 7-10% range for new cars. Approval is generally straightforward.
Fair Credit (620-659): This is where a 640 score sits. Expect APRs to be significantly higher, potentially in the 10-15% range or even more for used cars or longer terms.
Poor Credit (<620): Approval is challenging and often requires a co-signer, a substantial down payment, or a loan from a subprime lender with very high APRs (often 15% and above).

Therefore, while a 640 score isn't "bad" in the sense of being impossible to get a loan, it's certainly not "good" if your goal is to secure the most affordable financing. It's a score that requires careful navigation of the auto loan landscape.

Factors Affecting Car Loan Approval with a 640 Score

Your credit score is a significant factor, but it's not the only one. When you apply for a car loan with a 640 credit score, lenders will scrutinize other aspects of your financial profile to assess your overall risk. Understanding these factors can help you strengthen your application and improve your chances of approval, even with a fair credit score.

Down Payment Size

A larger down payment significantly reduces the lender's risk. If you can put down a substantial amount of money, it demonstrates your financial commitment and reduces the amount you need to borrow. For a 640 score, a down payment of 10-20% of the vehicle's price can make a considerable difference in approval odds and the terms offered. For example, if you're looking at a $25,000 car, a $2,500 to $5,000 down payment can be very persuasive.

Loan-to-Value (LTV) Ratio

This ratio compares the amount you want to borrow to the actual value of the car. Lenders prefer a lower LTV. If you're trying to finance 100% of a vehicle's price with a 640 score, approval will be much harder. Keeping the LTV below 80% (meaning you're putting down at least 20%) is often a good target. This means choosing a car that isn't too expensive relative to your down payment and credit score.

Debt-to-Income Ratio (DTI)

Your DTI is a crucial metric. It's calculated by dividing your total monthly debt payments (including rent/mortgage, credit card minimums, student loans, and the proposed car payment) by your gross monthly income. Most lenders prefer a DTI of 43% or lower, but for borrowers with fair credit, they might look for an even lower DTI, perhaps 35% or less, to feel more comfortable.

Example Calculation:

Gross Monthly Income: $4,000

Existing Monthly Debt Payments (student loans, credit cards, etc.): $800

Proposed Car Payment: $400

Total Monthly Debt: $800 + $400 = $1,200

DTI = ($1,200 / $4,000) * 100 = 30%

A 30% DTI is excellent and would significantly boost your chances of approval with a 640 score.

Vehicle Age and Type

Lenders often have stricter requirements for older or higher-mileage vehicles. Financing a brand-new car might be easier than financing a 10-year-old used car with a 640 score. Newer vehicles generally hold their value better and are perceived as less risky. If you're looking at used cars, focus on models that are only a few years old and have a good reputation for reliability.

Employment Stability and Income Verification

Lenders want to see a stable income that can reliably cover the loan payments. If you have a consistent work history (typically at least two years in the same job or industry) and verifiable income, this can offset a fair credit score. Proof of income, such as pay stubs and tax returns, will be required.

Co-signer or Co-applicant

Adding a co-signer with a strong credit history can significantly improve your chances of approval and potentially secure a better interest rate. A co-signer essentially agrees to be responsible for the loan payments if you are unable to make them. This reduces the lender's risk considerably. However, it's important to remember that a co-signer's credit score will be affected by the loan's payment history.

Relationship with the Lender

If you have a long-standing positive relationship with a bank or credit union, they might be more willing to work with you. They have a history of your financial behavior with them, which can sometimes lead to more flexible lending decisions, especially if you have a checking or savings account with them and have managed it well.

Average Interest Rates for a 640 Credit Score (2025)

Understanding the potential interest rates associated with a 640 credit score is crucial for budgeting and making informed decisions. In 2025, the automotive lending market continues to be influenced by economic conditions, inflation, and the Federal Reserve's monetary policy. While exact rates fluctuate, a 640 score consistently places borrowers in a higher-APR bracket.

Projected APR Ranges for 2025

Based on industry trends and historical data, here are projected average APRs for a 640 credit score in 2025:

New Car Loans: For borrowers with a 640 credit score, expect APRs to range from approximately 10% to 15%. This is a significant jump from the 5-7% rates typically offered to those with excellent credit.
Used Car Loans: Used car loans are generally considered riskier by lenders, and therefore, the APRs are often higher. For a 640 score, expect rates to be in the range of 12% to 18%, and potentially even higher for older or higher-mileage vehicles.

It's important to note that these are averages. The actual APR you receive will depend on the lender, the specific vehicle, the loan term, and the other factors mentioned previously (down payment, LTV, DTI, etc.).

Impact of Interest Rates on Monthly Payments and Total Cost

The difference between a 6% APR and a 12% APR can be substantial over the life of a car loan. Let's illustrate with an example:

Scenario: $25,000 loan for 60 months.

At 6% APR:

Monthly Payment: Approximately $483
Total Interest Paid: Approximately $4,000
Total Cost of Vehicle: Approximately $29,000

At 12% APR:

Monthly Payment: Approximately $555
Total Interest Paid: Approximately $8,300
Total Cost of Vehicle: Approximately $33,300

As you can see, a 6% difference in APR leads to an extra $72 in monthly payments and an additional $4,300 in interest paid over five years. This highlights why improving your credit score or securing the best possible rate is so critical.

Where to Find Loans with a 640 Score

When you have a 640 credit score, you'll likely need to explore a wider range of lenders than someone with excellent credit. Here are common sources:

Dealership Financing (Buy Here, Pay Here): Many dealerships offer in-house financing. "Buy Here, Pay Here" (BHPH) dealerships specifically cater to buyers with poor or fair credit. While they offer a path to ownership, their interest rates are typically among the highest.
Subprime Lenders: These are lenders that specialize in working with borrowers who have lower credit scores. They are more willing to take on higher risk but charge higher APRs.
Online Lenders: Numerous online lenders offer auto loans and may have more flexible approval criteria than traditional banks. Some specialize in fair credit.
Credit Unions: Credit unions can sometimes be more flexible than large banks, especially if you are a member. They may offer competitive rates even for borrowers with fair credit.
Banks: Your current bank or credit union might offer auto loans. It's worth checking with them, especially if you have a good relationship.

Negotiating Your Interest Rate

Even with a 640 score, don't be afraid to negotiate. If you've shopped around and received multiple loan offers, you can use them as leverage. You can also try to negotiate the price of the car separately from the financing. Getting pre-approved from multiple sources before visiting a dealership can give you a stronger negotiating position.

Types of Car Loans Available for a 640 Score

With a 640 credit score, you're in a position to qualify for several types of auto loans, though the terms will reflect your credit standing. Understanding these options can help you choose the most suitable loan for your situation.

Direct Auto Loans

This is the most common type of car loan. You apply for a loan directly from a bank, credit union, or online lender. Once approved, you receive the funds and can use them to purchase a vehicle from any dealership or private seller. The loan is secured by the car itself.

Pros: Often competitive rates (even for fair credit), flexibility in where you buy the car, clear repayment terms.
Cons: Approval can be challenging with a 640 score without other strong financial indicators.

Dealership Financing

When you shop for a car at a dealership, they often have financing departments that can help you secure a loan. They work with various lenders, including those who specialize in subprime loans. This can be convenient, but it's essential to compare their offers with direct loans.

Pros: Convenience, can sometimes offer special financing deals, may be more lenient with credit scores.
Cons: Rates can be higher than direct loans, dealers may mark up the interest rate, pressure to buy on the spot.

"Buy Here, Pay Here" (BHPH) Loans

These dealerships act as both the seller and the lender. They typically cater to buyers with very low credit scores (often below 600), but they will also work with scores in the 640 range. They often have older, higher-mileage vehicles.

Pros: Easier approval for those with challenged credit, no credit check required (or a very lenient one).
Cons: Extremely high interest rates (often 20% or more), limited vehicle selection, shorter loan terms, may require weekly or bi-weekly payments, often do not report to major credit bureaus (meaning they don't help you build credit).

For a 640 score, BHPH should generally be considered a last resort due to the exorbitant costs.

Secured vs. Unsecured Loans

Most car loans are secured loans, meaning the vehicle itself serves as collateral. If you default, the lender can repossess the car. This makes them less risky for lenders, which can be beneficial for borrowers with fair credit.

Unsecured loans, like personal loans, do not require collateral. While you might be able to get a personal loan with a 640 score, the interest rates will likely be very high, and the loan amounts might not be sufficient for a car purchase. They are generally not the preferred option for buying a car.

Leasing a Car

Leasing is different from buying. You're essentially renting the car for a set period. While leasing can offer lower monthly payments than financing a purchase, it typically requires a good to excellent credit score. A 640 score might make it difficult to qualify for a lease, and if you do, the terms might not be favorable.

Pros: Lower monthly payments, always driving a newer car, less hassle with selling.
Cons: Mileage restrictions, wear-and-tear charges, no ownership equity, often requires higher credit scores for approval.

Co-signed Loans

As mentioned earlier, getting a loan with a co-signer who has good credit can significantly improve your chances of approval and help you secure a better interest rate. The loan is technically in both your names, but the co-signer's creditworthiness is a major factor for the lender.

Pros: Increased approval odds, potentially lower interest rates, opportunity to build credit if payments are made on time.
Cons: Puts the co-signer's credit at risk if payments are missed, can strain relationships if financial issues arise.

Recommendation for a 640 Score: Focus on direct auto loans from banks, credit unions, and reputable online lenders. Explore dealership financing but compare offers carefully. BHPH should be a last resort. A co-signer can be a valuable asset.

Strategies to Improve Your Chances of Approval

While a 640 credit score can get you a car loan, improving your score and application strength can lead to better terms and save you significant money over time. Here are actionable strategies to enhance your chances of approval and secure a more favorable auto loan:

1. Get Pre-Approved Before Shopping

This is perhaps the most crucial step. Before you even set foot on a dealership lot, apply for an auto loan from your bank, a local credit union, or an online lender. This gives you:

A Realistic Budget: You'll know exactly how much you can borrow and at what estimated interest rate.
Negotiating Power: You can show the dealership that you have financing secured, allowing you to focus on negotiating the car's price.
Protection Against Dealership Markups: Dealerships sometimes add points to the interest rate they offer. Pre-approval from an external lender gives you a benchmark to compare against.

2. Boost Your Credit Score

Even a small increase in your score can make a difference. Focus on these key areas:

Pay Down Credit Card Balances: Aim to reduce your credit utilization ratio. If you owe $3,000 on a card with a $5,000 limit (60% utilization), paying it down to $1,500 (30% utilization) can significantly boost your score.
Ensure On-Time Payments: Set up automatic payments or reminders for all your bills. Even one late payment can hurt your score.
Check Your credit reports for Errors: Obtain free copies of your credit reports from AnnualCreditReport.com and dispute any inaccuracies. Errors can unfairly lower your score.
Avoid Opening New Credit Accounts: Unless absolutely necessary for a co-signer, refrain from opening new credit cards or loans in the months leading up to your car purchase, as this can temporarily lower your score.

3. Save for a Larger Down Payment

As discussed, a larger down payment is one of the most effective ways to offset a fair credit score. The more you can put down, the less risk the lender takes on. Aim for at least 10-20% of the vehicle's price.

4. Improve Your Debt-to-Income Ratio (DTI)

Reducing your existing debt can lower your DTI. Consider paying off smaller debts or consolidating them if possible. This demonstrates to lenders that you have more disposable income available for a car payment.

5. Consider a Co-signer

If you have a trusted friend or family member with excellent credit who is willing to co-sign, this can dramatically improve your approval odds and secure a much lower APR. Ensure you understand the responsibilities and risks involved for both parties.

6. Choose a Less Expensive Vehicle

With a 640 score, financing a $40,000 SUV might be a stretch. Opting for a more affordable, reliable used car or a budget-friendly new car will lower the loan amount needed, making it easier to get approved and reducing your overall interest costs.

7. Shop Around for Lenders

Don't settle for the first offer you receive. Compare rates and terms from multiple sources:

Traditional banks
Credit unions
Online auto lenders
Dealerships (but use their offers as a comparison point)

The difference in APRs from different lenders can be substantial.

8. Be Prepared with Documentation

Have all necessary documents ready to streamline the application process. This typically includes:

Proof of income (pay stubs, W-2s, tax returns)
Proof of residence (utility bills, lease agreement)
Valid driver's license
Information about your current debts

Alternatives if You Can't Get Approved

If, after exploring all options, you find that securing a car loan with a 640 credit score proves too difficult or the terms are prohibitively expensive, don't despair. There are alternative solutions that can help you get around or improve your situation:

1. Delay Your Purchase and Improve Your Credit

This is often the best long-term strategy. If you can wait a few months or even a year, focus on improving your credit score. Implementing the strategies mentioned earlier can lead to a significantly better financial outcome when you are ready to buy.

Focus on Credit Building: Make all payments on time, reduce credit card balances, and avoid new credit inquiries.
Monitor Your Progress: Regularly check your credit score and reports to see your improvements.

2. Consider a Co-signer

As highlighted before, a co-signer with good credit is one of the most effective ways to get approved for a loan when your own credit is a barrier. If you have a family member or close friend with strong credit who is willing to help, discuss the loan terms and responsibilities thoroughly with them.

3. Explore Personal Loans

While not ideal for car purchases due to potentially higher rates and shorter terms, a personal loan might be an option if you need to finance a vehicle. However, with a 640 credit score, the APR on a personal loan could be very high. You would then use the personal loan funds to purchase a car, often from a private seller.

Pros: Can be used for private party sales, may offer more flexibility than auto loans for some.
Cons: Typically higher interest rates than secured auto loans, shorter repayment terms, no collateral (which can be a pro for some, but a con for lenders).

4. Rent-to-Own Programs (Use with Extreme Caution)

Some dealerships offer rent-to-own agreements. You pay a weekly or monthly fee, and a portion of that payment goes towards the purchase price. After a set period, you can buy the car outright. These programs often have inflated prices and unfavorable terms, making them very expensive in the long run. They are generally not recommended.

5. Utilize Public Transportation or Ride-Sharing Services

If your need for a car isn't immediate or critical, consider alternative transportation methods. Relying on public transit, ride-sharing apps, or carpooling can save you money and allow you time to improve your credit score and financial situation.

6. Borrow from Friends or Family

If you have a supportive network, you might be able to borrow money from friends or family to purchase a car outright or make a substantial down payment. Ensure you have a clear, written agreement outlining repayment terms to avoid misunderstandings.

7. Look for More Affordable Vehicle Options

Consider purchasing a much less expensive vehicle, perhaps one that you can afford to buy with cash. This could mean a older used car or a very basic model. This would eliminate the need for a car loan altogether, or at least significantly reduce the amount you need to borrow.

8. Consider a Secured Credit Card or Credit-Builder Loan

If your credit score is borderline or you have limited credit history, using a secured credit card or a credit-builder loan can help improve your score over several months. These products are designed to help individuals build or rebuild credit responsibly.

The key takeaway is to avoid making a hasty decision that could lead to long-term financial strain. If direct auto loan approval is challenging with a 640 score, explore these alternatives and focus on strengthening your financial profile for future success.

The Long-Term Impact of a Car Loan on Your Credit

Taking out a car loan, even with a fair credit score like 640, can have a significant impact on your credit history, both positive and negative, depending on how you manage the loan. Understanding this impact is crucial for long-term financial health.

Positive Impacts: Building Credit History

When you successfully manage an auto loan, it can be a powerful tool for building or improving your credit score. Here's how:

Payment History: Making consistent, on-time payments on your car loan is reported to the major credit bureaus (Equifax, Experian, and TransUnion). This demonstrates to future lenders that you are a responsible borrower, which is the most critical factor in credit scoring.
Credit Mix: An auto loan is an installment loan, which adds to your credit mix. Having a variety of credit types (e.g., revolving credit like credit cards and installment loans) can positively influence your score, showing you can manage different kinds of debt.
Credit Utilization: While your car loan payment itself doesn't directly impact credit utilization (which applies to revolving credit), successfully paying it down frees up income that could be used to pay down credit card balances, indirectly helping your utilization ratio.
Length of Credit History: As you continue to pay off your car loan over its term, it contributes to the average age of your credit accounts, which can also benefit your score.

Negative Impacts: Risks of Default and Poor Management

Conversely, if you struggle to make payments or default on your car loan, the consequences can be severe and long-lasting:

Damaged Payment History: Late payments or missed payments will be reported to credit bureaus, significantly lowering your credit score. This makes it harder to get approved for future loans, credit cards, or even rent an apartment.
Repossession: If you default on your loan, the lender can repossess the vehicle. This is a major negative mark on your credit report and will stay with you for seven years.
Deficiency Balance: After repossession, the car is usually sold at auction. If the sale price doesn't cover the outstanding loan balance plus repossession costs, you will still owe the remaining amount, known as a deficiency balance. This debt can lead to further collection efforts and damage your credit even more.
Higher Future Interest Rates: A history of missed payments or repossession will result in much higher interest rates on all future credit, costing you significantly more over time.
Impact on Co-signer: If you have a co-signer, any negative activity on the loan will also negatively impact their credit score, potentially straining your relationship.

The 640 Score Context

For someone with a 640 credit score, the stakes are slightly higher. You're already in a credit tier where lenders are more cautious. Demonstrating responsible repayment on an auto loan can be a fantastic way to move out of the "fair" credit category and into the "good" or "very good" range. However, any misstep can push you further down into the "poor" credit category, making future borrowing extremely difficult and expensive.

Strategies for Positive Impact

To ensure your car loan has a positive long-term impact:

Borrow Only What You Need: Don't overextend yourself. Choose a vehicle and loan amount that fits comfortably within your budget.
Make Payments On Time, Every Time: Set up automatic payments or calendar reminders.
Pay More Than the Minimum When Possible: Extra payments can help you pay off the loan faster and reduce the total interest paid, which is beneficial for your financial health.
Avoid Default at All Costs: If you anticipate having trouble making a payment, contact your lender immediately to discuss potential solutions like deferment or a modified payment plan.

In summary, a car loan can be a double-edged sword. Managed well, it's a credit-building opportunity. Managed poorly, it can lead to significant financial hardship and long-term credit damage. For a borrower with a 640 credit score, diligence and responsible financial behavior are paramount to harnessing the positive aspects and avoiding the negative.

Conclusion

Navigating the car buying process with a 640 credit score in 2025 presents a clear path, albeit one with potential challenges. While a 640 score is classified as "fair," it is generally sufficient to secure auto financing, meaning you can buy a car. However, it's crucial to understand that this score typically means you'll face higher interest rates compared to borrowers with better credit profiles. These elevated APRs can significantly increase the total cost of the vehicle over the loan's term.

To maximize your chances of approval and secure the most favorable terms possible, focus on strengthening your application. This includes saving for a substantial down payment, improving your debt-to-income ratio, and potentially enlisting a co-signer with a strong credit history. Pre-approval from multiple lenders before visiting dealerships is a non-negotiable step, empowering you with a budget and leverage for negotiation. Explore options from banks, credit unions, and reputable online lenders, and be wary of the extremely high costs associated with "Buy Here, Pay Here" dealerships, which should be a last resort.

Ultimately, a car loan can serve as a valuable tool for building or rebuilding your credit if managed responsibly. Consistent, on-time payments will positively impact your credit history. Conversely, missed payments or default can have severe, long-lasting negative consequences. By approaching your car purchase strategically, understanding the financial implications, and committing to responsible repayment, you can successfully acquire a vehicle and set yourself on a path toward improved financial health.