What Credit Score Do You Need for a Personal Loan?
Your credit score is one — but not the only — factor that lenders use to decide your rate and loan amount.
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The typical minimum credit score needed to qualify for a personal loan is from 550 to 660, according to lenders surveyed by NerdWallet. This range is considered “fair” credit by common scoring models. However, credit score requirements for personal loans vary across lenders, and some may require a higher score.
Many lenders give preference to borrowers with good or excellent credit scores (mid 600s and above), but some accept borrowers with bad credit (a score in the 500s or below).
Lenders often look at the FICO credit scoring model, but some use VantageScore. Other lenders say they use many data points to determine approval, which may include a FICO or VantageScore.
A high credit score doesn’t guarantee you’ll qualify or get a low interest rate. Qualifying rests largely on your creditworthiness, which is usually a combination of your credit history and score, in addition to income and debt. Use this tool to learn what loan options you may have based on your credit score.
» MORE: Compare the best personal loans
How your credit score impacts your personal loan offer
Your credit score not only affects whether you qualify for a personal loan, but it also helps determine what annual percentage rate, or APR, you’ll receive. Borrowers with good scores are likely to qualify for a lower APR than bad-credit borrowers.
Your APR is made up of your interest rate plus any origination fee your lender charges, and lenders are more likely to charge a higher origination fee if you have bad credit.
Here are the average estimated personal loan APRs based on credit score ranges:
Borrower credit rating | Score range | Estimated APR |
|---|---|---|
Excellent | Any score in the high 700s or higher. | 12.74%. |
Good | Any score from the mid-600s to mid-700s. | 16.61%. |
Fair | Any score in the mid-500s to low 600s. | 19.92%. |
Bad | Scores from 300 to the high 500s. | 21.64%. |
A low credit score resulting in a higher APR means your monthly payments will be higher, since you’ll be paying more in interest.
A low credit score could also be the reason a lender approves you for a small loan amount.
Getting a personal loan with fair or bad credit
Though lenders consider multiple factors on a loan application, your credit score is often given a lot of weight.
It’s possible to get a personal loan with fair or bad credit, but you’re likely to receive a rate on the high end of a lender’s range, which can be up to 36%. Those with a score below 550 may not qualify for a loan with an APR below 36% — the highest interest rate an affordable loan can have, according to most consumer advocates.
Lenders that offer no-credit-check personal loans may charge triple digit interest in lieu of not thoroughly evaluating your ability to repay the loan. These loans typically have shorter repayment terms, and your interest costs could surpass the amount you initially borrowed.
Lenders that offer fair-credit loans may look beyond your credit score to make an approval decision. Credit unions, for example, may consider membership history and other factors on an application.
Adding a co-signer, co-borrower or collateral to your loan application may help you qualify or get a lower rate, but not all lenders offer these options. If you default on a co-signed or joint loan, your co-signer or co-borrower will be responsible for making payments. If you stop making payments on a secured loan, you’ll lose your collateral.
Tips to build your credit
If you have time to build credit before applying, you may improve your chance of qualifying for a personal loan at a low rate. It’ll likely take a few months for these steps to affect your score, but it may be worth it if you get a lower rate on a loan you’ll be repaying for a year or more.
» MORE: How to build credit
1. Make payments on time
Credit card and loan payments that are more than 30 days past due can cause your credit score to drop by about 100 points. Consider setting up automatic payments or due date reminders to ensure you won’t miss payments on your current debts. If the payment date doesn’t work for you, ask your creditors to change it.
2. Dispute credit reporting errors
Review your credit reports from each of the three credit bureaus — Equifax, Experian and TransUnion — to see if there are any errors that may be dragging your score down, like incorrect account balances or accounts you don’t recognize. Dispute any mistakes online, by mail or by phone. You can get weekly credit reports for free at AnnualCreditReport.com.
3. Lower your credit utilization
Your credit utilization ratio is the percentage of your available revolving credit that you’ve used. Try to keep this number below 30%. If it's higher, take time to pay down your credit card balances and other credit lines. Requesting a credit limit increase can also lower your credit utilization.
4. Become an authorized user on someone’s credit card
If you know someone with a higher credit score who will let you become an authorized user on their credit card, you can benefit from their good credit habits, such as on-time payments or a low credit utilization. You aren’t responsible for the cardholder’s balance and don’t even need access to the credit card.
5. Get a credit-builder loan or secured credit card
Both a credit-builder loan and a secured credit card require you to pay money upfront – either in the form of loan payments or a security deposit – before you borrow from the lender. This reduces the lender’s risk, making them easier to qualify for, while on-time payments build up your credit score
at Self
Requirements for a personal loan beyond credit score
Meeting a lender’s requirements for minimum credit score doesn’t necessarily mean you’ll qualify for a loan.
Here are the other factors most lenders review on a personal loan application:
Credit history: Lenders like to see a long credit history on a loan application. A lender may say it requires a minimum of two or three years of credit history, but longer is typically better. More accounts throughout your credit history show a lender how diligently you’ve made payments. Borrowers with multiple credit cards, a mortgage, or an auto loan showing regular on-time payments may be more likely to qualify.
Income: Lenders may ask for copies of your pay stubs, bank statements or tax documents to ensure you have a steady source of income. Some lenders have specific income requirements, while others just want to know you’re bringing in enough money to repay your personal loan.
Debt-to-income ratio: Lenders seek borrowers who make enough money to meet their current monthly financial obligations, plus loan payments. Many use your debt-to-income ratio to see whether another loan would overextend your finances.
Free cash flow: Your debt-to-income ratio doesn’t account for expenses like gas, groceries and rent, so some lenders look at bank account transactions to see how much money borrowers have left after other expenses. Lenders call this “free cash flow,” and the more of it you have, the more confident a lender may feel approving your application.
» MORE: How to get a personal loan
Alternatives to personal loans
You may have other ways to borrow money, even if you don’t meet credit score requirements for a personal loan.
Buy now, pay later: Many major retailers offer “buy now, pay later” plans that break the cost of a purchase into smaller payments – typically four interest-free biweekly payments. The BNPL company may perform a soft credit check, but you generally don’t need a high credit score to be approved.
Cash advance apps: Apps like Dave and Brigit approve borrowers for small loans based on their income, not their credit scores. You’re essentially getting an advance on your upcoming paycheck, but borrowing can come with fees.
Family loans: Getting a loan from a family member or friend requires no credit check and may be interest free. To avoid disputes that can sour the relationship, have both parties sign a loan agreement detailing how the money will be repaid.
Local financial assistance programs: Nonprofits, religious groups and charities in your area may operate programs to help people with food, clothing, transportation, rent payments, utilities and other essential needs. Contact 211 to find what’s available near you.
on NerdWallet