Suze Orman Says to Wait to Buy a Car Until Your Credit Score Hits This Number

Waiting for a better credit score could save you a lot of money on your car loan.

If you’re buying a car, chances are you are going to have to borrow money to pay for it. For most people, a car loan is the best option, rather than a personal loan or credit card, because car loans are secured loans that usually come with a more affordable fixed interest rate.

If you are taking out a car loan, your credit score is going to impact how much you must pay to borrow. That's why finance expert Suze Orman recommends waiting to buy a car until your credit score hits a certain threshold. 

Suze Orman says this is the minimum recommended credit score before buying a car

According to Suze Orman, the credit score you have when applying for a loan could have a huge impact on total costs of your vehicle, with some borrowers paying more than double the interest rate of others due to the fact they have subprime credit.

Since applying with a low score can cost so much more, Orman believes you should ideally put off the purchase of a vehicle until your credit score is at least 700. 

"Unless you must buy ASAP, I would advise anyone with a credit score below 700 or so to work on building up their credit score before loan shopping," Orman said. "Paying all your bills on time is a big help, as is reducing any unpaid balance on your credit card bills."

A score of 700 usually falls within the "good" range, which means you should be able to get a loan at an affordable cost from a variety of different lenders. By shopping around with a good score, financing should be relatively affordable so you won't face much higher monthly payments due to extra interest owed to lenders who charge you more for presenting a greater risk. 

What to do if you can't wait

Of course, not everyone can wait to improve their credit score, even if doing so would be ideal. If you find yourself in a situation where you must buy a car ASAP but your credit is below the 700 threshold, there are a few steps you can take to try to make the purchase as affordable as possible. 

First and foremost, you'll want to shop around before you commit to borrowing. Don't assume that the dealer is always going to have the best rate. Check with the bank you do business with, or shop around online with different lenders to find one that offers the most competitive terms. 

If there is someone in your life with good credit, you may also want to consider asking if they might be willing to cosign for you. A co-signer with good credit can help you qualify for a loan at much more competitive rates -- but you need to be sure you can pay off your loan in full so you don’t damage the co-signer's credit and hurt your relationship.

Saving up a larger down payment also reduces the amount you must borrow and the risk to the lender, so it’s well worth it if you can.

Ultimately, focusing on increasing your credit score can help with your car purchase and other financial obligations in the future. And, if you can wait to borrow until you improve your score, you should try. But if that's not possible, taking these steps can help you get the most affordable loan available for a car you need now.