Refinancing your car loan can be a smart move to lower your monthly payment, reduce your interest rate or adjust the term of your loan. But if your credit isn’t good, you might be wondering—do you need good credit to refinance your car loan? Not necessarily. While having good credit can improve your chances of getting better loan terms, it's not the only factor lenders consider.

 

What Is Car Loan Refinancing?

When you refinance your car loan, you're replacing your current loan with a new one, often from a different lender. The new loan pays off your original loan, and you begin making payments on the new loan. The goal is usually to save money by securing a lower interest rate or to make your monthly payments more manageable.

 

How Your Credit Score Affects Refinancing

Your credit score is one of the main factors lenders consider when determining your eligibility for refinancing. Borrowers with higher credit scores typically receive better interest rates, which can translate to lower monthly payments and less paid over the life of the loan.

Here’s a general breakdown of credit score ranges.

• Excellent (750+): Most favorable rates
• Good (700–749): Competitive rates
• Fair (640–699): Acceptable, but may not qualify for best terms
• Poor (below 640): Limited options, higher interest rates are likely

But a lower credit score doesn't automatically disqualify you from refinancing. In fact, if your credit has improved since you first got your loan, even slightly, you may still qualify for better terms.

You can check your FICO® Score using our Mobile Banking App.

 

Other Factors Lenders Consider

Besides credit score, lenders also look at the following factors.
• Your income and debt-to-income ratio: Can you afford the new payment?
• The value of your car: Is the car worth more than what you owe?
• Your loan payment history: Have you made your current payments on time?
• The loan balance and term left: Some lenders have minimum or maximum loan amounts or terms they will refinance.

If you have a solid payment history and stable income, lenders may be willing to work with you, even if your credit score isn’t ideal.

 

Tips for Refinancing with Less-than-Great Credit

If your credit isn’t where you want it to be, here are a few steps you can take to improve it.

1. Check your credit report for errors and dispute any inaccuracies.
2. Make all current payments on time—on your car loan and other debts.
3. Pay down existing debt to improve your debt-to-income ratio.
4. Consider a co-signer with stronger credit to help qualify.
5. Shop around. Different lenders have different criteria, so it pays to compare.

You don’t need perfect credit to refinance your car loan, but the better your credit, the better your potential loan terms. That said, if your financial situation has improved since you got your current loan, or if rates have dropped, it’s worth looking into refinancing, even with average or fair credit.

We work with our members at all credit levels to help find the right refinance solution. Whether your goal is to lower your monthly payment or pay off your loan faster, our team is here to guide you through the process. Reach out to explore your options—you might be surprised by what you qualify for.