What Credit Score Do You Need for a Personal Loan?

When applying for a personal loan, your credit score plays a major role in determining your eligibility. This number, which is calculated from your credit reports, measures how well you’ve handled finances in the past. It helps lenders predict whether you’ll make on-time payments in the future, which is an important factor in the loan approval process. A higher credit score increases the chances of getting approved and influences the interest rate and loan amount you can borrow.

Some lenders offer loans to people with varying credit ranges, but better terms and lower interest rates are more likely for those with higher credit scores. It’s worth noting that no particular score guarantees approval or a good rate, so focusing on maintaining a healthy financial history can make a big difference.
What Credit Score Do You Need for a Personal Loan?

The minimum credit score needed to get approved for a personal loan often depends on the lender. Some lenders, like Happy Money, require a FICO score of 640, while Upstart has a minimum score of 300. In other cases, applicants with scores between 600 and 700—such as those who work with Avant—are more likely to receive loans.

How Your Credit Score Impacts Your Personal Loan Application
Your credit score is a crucial factor in determining how lenders view your personal loan application. It serves as an indicator of your ability to repay debts and helps lenders evaluate your creditworthiness. A higher credit score often means better terms, while a low credit score can result in stricter conditions or even application rejection.

Is It Possible to Get a Personal Loan With Bad Credit?

Secured personal loan: If you have low credit scores, a secured personal loan could be an option. This type of loan requires collateral, such as a car, home, or cash, to back the loan. If the borrower can’t repay, the lender can take the collateral to cover losses. This added security often results in less strict qualification requirements compared to an unsecured personal loan.

Co-signer: Adding a co-signer with higher credit can increase your chances of getting approved and even lead to better terms. The co-signer agrees to be responsible for paying the loan if the borrower fails to do so, making them a key factor in lenders’ decisions for riskier applications.

No-credit-check loan: Some lenders offer no-credit-check loans, which can be a lifeline for those with poor credit. However, these loans come with significant risks such as high costs and fees. Certain payday loans in this category are even illegal in some states, so it’s important to thoroughly check and understand all terms before applying.

How to Improve Your Credit Score

Check your credit score: Before you apply for a personal loan, check your FICO® Score and Experian credit report for free. This will help you determine which areas need attention and allow you to focus on improving your score before applying.

Pay on time: Late payments hurt your credit score. If you’re behind on debt, get caught up as quickly as possible. Then make it a priority to pay on time, since your payment history is a major factor that carries the most weight in your FICO® Score.

Pay down credit card balances: Your credit utilization rate is an important factor in your score. Lower utilization rates are better, so focus on reducing your credit card balances to improve your credit score.

Avoid unnecessary applications: A single hard inquiry on your credit report won’t cause much damage, but multiple hard inquiries can negatively impact your score. Only apply for credit when you truly need it.

Dispute inaccurate information: If your credit report contains inaccurate information, you have the right to file a dispute with the
credit reporting agencies. Fixing errors can significantly benefit your credit score.