Many young adults ask about the credit score needed to buy a car without a cosigner to backstop their borrowing credentials. The answer is simple. It depends.
A cosigner takes full responsibility for paying back an auto loan. You must meet specific underwriting standards without this second person backing you up.
A good credit score for a stand-alone auto loan is 660 or higher, but lenders consider other factors, meaning your minimum number could be higher or lower than this baseline figure.
For instance, car finance companies will also weigh the down payment size, Debt-to-Income (DTI) ratio, and employment stability when making lending decisions.
Down Payment Needed
The size of your down payment greatly impacts the minimum credit score needed to buy a car without a cosigner. Auto finance companies vary terms based on the deposit amount for at least two reasons.
- Smaller amounts financed mean less risky loans
- Vehicle equity influences future default behaviors
No Money Down
You might need a credit score above 660 to buy a car without a cosigner when you have no money for a down payment, as lenders want something positive to balance the application.
People with bad credit and no money down sometimes find leases easier than loans because the monthly payments are lower. Finance companies are more willing to approve applicants able to afford the periodic installments.
People with no down payment are more likely to default as they frequently experience negative equity (underwater loan). Negative equity occurs when the loan balance exceeds the vehicle value, frequently occurring with rapidly depreciating assets such as automobiles.
Large Down Payment
You could have the lowest credit score of 350 and still qualify to buy a car without a cosigner if you pay for the vehicle in cash. Your down payment would be 100% of the purchase price, meaning you do not need an auto loan.
Of course, most drivers with horrible credit do not have that kind of cash lying around. But the point remains valid: making a sizable down payment boosts your approval odds.
Disabled people buying a car with social security income (SSI) have unique rules about down payments. Gifts from friends and family members can help you maintain eligibility.
Debt-to-Income Ratio Needed
Your projected Debt-To-Income (DTI) ratio influences the minimum credit score needed to buy a car with no cosigner. Auto finance companies use the DTI to measure affordability, a third critical underwriting criterion.
A good DTI for a car loan is 35%, which you might calculate as follows:
Monthly debt payments ($3,500)/Monthly income ($10,000) = 35%
You might need a credit score above the yardstick 660 figure for a car loan without a cosigner if the projected DTI is above the 35% lender’s target. In this case, the finance company will be rightly concerned that you cannot afford the vehicle.
You can get a car loan with a high DTI, provided you shine in other application areas or manage the issue.
- Have an excellent automotive credit score
- Make a sizeable down payment to ensure positive equity
- Buy a cheaper model to lower monthly payments
A credit score below 660 is adequate when buying a car without a cosigner when your DTI is below the 35% standard. Lenders see that you can afford the monthly payments – with a cushion.
People with a low DTI are not living check-to-check and can put aside money regularly into a savings account, making them less likely to default.
For instance, they have emergency money for car repairs and are less likely to fall behind on auto loan payments when the vehicle eventually breaks down or the brake pads wear out.
Employment History Needed
Your employment record and income documentation can affect the minimum credit score needed to buy a car without a cosigner. Lenders want assurances that your income will continue to make the auto loan payments on time.
Proof of Income
If you lack adequate proof of income, you will probably need a credit score above 660 to get an auto loan without a cosigner. Lenders will ask for recent pay stubs, so be prepared if you do not have this documentation.
Car loans for independent contractors without proof of income are possible even if you do not have years of tax returns to share with the lender. For instance, ride-sharing drivers might get away with recent bank statements showing regular deposits from Uber, Lyft, and other gig worker companies.
Likewise, you might need a credit score above the 660 standard to purchase an auto without a cosigner if you cannot verify employment. Lenders will want to see that you have a job before approving a loan.
Auto finance companies might contact your employer to verify your job status or use an online service to accomplish the same goal. Either way, lenders ensure the engine driving loan repayment (your job) is secure.