Buying a classic car can be a car enthusiast’s lifelong dream. But if you don’t have enough cash to cover the full purchase, you may need to explore financing options — which can be challenging, especially if your credit history is limited or less-than-perfect. The good news is that there are still ways to finance a classic car regardless of your credit standing –– the key is knowing what lenders look for when funding  classic car loans, and taking the steps needed to improve your credit history ahead of time. Here’s what you should know:

Types of classic car loans

While there are several ways to finance the purchase of a classic car, the two most common are specialty loans or personal loans.

Specialty loans are a type of auto loan specifically designed for classic or collector cars which typically don’t qualify for traditional auto loans due to their age or mileage.  Depending on the lender, these loans may come with terms of up to 96 months, depending on the lender. In contrast, traditional car loans often cap out at 84 months.

If specialty loans are not an option, personal loans can serve as an alternative. Used for a variety of needs, including financing purchase of a classic car, personal loan funds can be deposited directly into your bank account and used to buy a vintage vehicle. Personal loans can either be secured, which require collateral (such as the car itself), or unsecured, which are offered based on your credit history.

Interest rates on classic car loans may be higher than those for traditional vehicles. Checking with a lender to see if you are prequalified can help you understand if you’re likely to qualify for a classic car loan and see possible loan terms.

Credit score requirements for classic car loans

There probably is no exact credit score needed to qualify for a classic car loan, and the score that’s needed will vary by lender, however, many start around 660 –– the typical threshold for a “good” credit score.

A higher credit score is generally correlated with a lower interest rate and better terms when compared to offers extended to those with less-than-ideal credit. If offered by your lender of choice, prequalification can help you see if you’re likely to be approved for a classic car loan and what your loan terms might be, if you’re approved. 

Other common classic car loan requirements

Beyond the consideration of your credit score, there are a couple of other requirements you may need to meet to fund your classic car purchase:

• Down payment: Specialty loans for classic cars may require that the buyer also make a down payment to the dealer. The higher the down payment, the lower the total borrowing cost.
• Insurance: Often you need to show evidence of insurance for the vehicle before you can access a classic car loan. In many cases, vintage or collectible cars are better suited for specialized coverage — known as classic car insurance — which comes with different qualifications and coverage options compared to standard auto insurance.

Tips to help raise your credit score 

Improving your credit score can open the door to more financing options — like specialty loans — and may help you qualify for better loan terms. The first step is knowing where your credit profile stands by checking your score.

Keep in mind, you typically have multiple credit scores, even within a single scoring model like FICO. Lenders may look at different versions of your score when reviewing your application. That said, most credit scores are based on similar key factors, including:

• Balances or utilized credit: Keeping the amount of your revolving credit, that is your outstanding balances, below 30% can help you achieve a good score.
• Payment history: Lenders want to see that you’re paying your lenders on time, so enrolling in autopay could help you avoid damaging your score with late or missed payments.
• Length of credit history: Longer credit histories are more favorable. Keeping your oldest credit accounts open can be useful.
• New inquiries: It’s generally advisable to avoid applying for new credit more than a couple of times per year, or submitting requests too close together in time.
• Mix of accounts: A mix of account types — such as a mortgage, credit cards and other loans — might help boost your score. But that doesn’t mean you should open new accounts solely to increase your credit mix.

Different credit scoring models assign different percentages to each factor, so some will impact your score differently and maybe even more than others. You can use those formulas alongside your credit report to find the best steps forward. For example, if you have a highly utilized credit ratio and that accounts for 30% of the score model your lender uses, reducing that debt could be impactful.

It can take several months (or longer) to substantially raise your score, depending on your circumstances. But if you can wait to apply for a loan when your score is high, your efforts are likely to pay off in the form of more favorable terms in loan offers. The longer you practice good financial hygiene, the higher your score could climb.

The bottom line

Your credit score plays an important role when obtaining a classic car loan. If you don’t have a high enough score to qualify for a specialty or personal loan, there are steps you can take to start improving your score over time.  While it may require some time and patience, improving your credit score could help you qualify for better rates and terms –– which may lead to savings over the life of the loan, giving you more financial flexibility down the road.

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