What Credit Score Do You Need For a Personal Loan?

If your credit score needs work and you need to borrow money, you might be wondering about the minimum credit score for personal loans. While there isn’t a common minimum personal loan credit score used across the industry, personal loan lenders will check your credit, and your credit score will impact your APR.

Your credit score is a numerical score assigned based on information in your credit report that shows your level of financial responsibility when borrowing. If you haven’t kept up with bill payments or have a lot of outstanding debt, your credit score will be lower, which could make it more difficult for you to get attractive rates on loans, credit cards and insurance premiums. If you can wait to borrow, sometimes the best solution is to improve your credit. But if you need money now and your credit is less-than-perfect, you still have options.

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    Personal loan lenders will check your credit

    When evaluating your application for a loan, personal loan lenders will check your credit score to determine the risk of lending money to you. If you have bad credit because you don’t pay your bills on time, you’re considered a higher risk. Lenders account for that risk by charging higher interest rates to borrowers with low credit scores. Your credit score isn’t the only thing lenders will consider (they’ll also look at your debt-to-income ratio), but it is a significant factor in determining your rates.

    When you pay your credit cards and other loans, creditors will report that information to the three major credit bureaus: TransUnion, Equifax and Experian. Your payment history is the most heavily weighted factor in determining your score. Other factors that influence your score include the amount of debt you have, the length of your credit history, the mix of types of credit you have and recent applications for new credit.

    [ Read: How to Get a Loan with Bad Credit ]

    So, what is a good credit score when applying for personal loans? Each credit bureau defines the score ranges a little differently. But in general, here’s a breakdown of how groupings of scores come across to lenders, according to Experian:

    Rating FICO® Credit Score
    Exceptional800–850
    Very Good740–799
    Good670–739
    Fair580–669
    Very Poor300–579

    Each lender also has different criteria for which scores they’ll accept and what rates they’ll charge. Some lenders are more accepting of fair credit borrowers than others.

    What is the minimum credit score needed for a loan?

    Every lender has its own requirements for approval. Some may only approve borrowers with a credit score of 670 or above, while others will consider borrowers with fair and bad credit. Personal loans are typically unsecured loans, which means the borrower doesn’t have to put forth any collateral, like their vehicle title, to secure the loan. Lenders take on a higher risk when extending unsecured credit, so these loans tend to come with higher interest rates for people with fair credit than secured loans.

    If you don’t qualify for an unsecured loan, or if your rate is too high, you might consider putting forth collateral for a secured loan. Several lenders offer secured loans and are more willing to work with fair or bad credit borrowers.

    Note that most lenders have a prequalification process, where you can check your rates with only a soft credit check. This can help you compare rates across lenders and see the difference in cost associated with an unsecured vs a secured loan.

    What credit score do most people who get approved for a personal loan have?

    According to Experian’s Consumer Credit Review, the average FICO Score for a personal loan borrower in 2020 was 689. That doesn’t mean you won’t be approved with a lower score, but you should know that a lower score will result in higher rates. That’s why it’s a good idea to keep tabs on your credit, so you know what to expect. You can also access a free copy of your credit report at AnnualCreditReport.com.

    [ Next: Best Personal Loan Rates ]

    What impacts my credit score?

    The following factors impact your FICO Score:

    • Payment history: This accounts for 35% of your score. If you become delinquent on any of your loans or have any debts in collections, these marks will cause a drop in your score.
    • Credit utilization: This accounts for 30% of your score. Having some debt is not necessarily bad, but if you’re using a large percentage of your available credit, it will cause a decrease in your score. For example, if you have a credit card with a $3,000 limit and $1,000 charged to the card, your credit utilization for that card is 30%.
    • Credit history length: This accounts for 15% of your score. The longer you’ve been borrowing, the safer you are in the eyes of a lender. To avoid shortening your credit history, don’t close paid-off credit cards unless it’s an identity theft risk.
    • Credit mix: The different types of credit (retail cards, student loans and mortgages) on your credit report will impact your score. There’s not much you can do about this, but it only accounts for 10% of your score.
    • New credit: Each time you formally apply for a new credit product, the lender typically does a hard credit pull, which causes a small but temporary dip in your credit. This only accounts for 10% of your score, but the drop can still be significant if you’re constantly applying for new credit cards. You should avoid opening too many accounts in the same two-year period and should only borrow what you need.

    [ For You: How Personal Loans Work ]

    What should I know when I take out a personal loan? 

    If you have bad credit, it can be difficult to qualify for a personal loan. And even if you qualify, your credit score will result in less-than-favorable interest rates that can drive up the cost of borrowing and make it more difficult to repay the loan. When assessing personal loans, you should consider the following before applying:

    • Interest rates: An interest rate represents the amount of extra money you’ll need to pay back as a proportion of your loan amount. A higher interest rate means it’ll cost more to repay the loan. You should do the math to see how much extra you’ll be paying over time.
    • APR: The APR represents the total cost of taking out a loan. It’s expressed as a percentage of the principal loan amount and includes fees and the interest rate. Again, it’s important to determine that this is manageable before you apply.
    • Fees: In addition to interest rates, some lenders charge fees, especially to borrowers with bad credit. Most commonly, they’ll charge an origination fee, which can be added or deducted from the loan amount. Many lenders also charge late payment fees, which is another reason to make sure you have the budget for the payments ahead of time. You should avoid lenders that charge prepayment fees, if possible.
    • Loan term: The loan term is the length of time you have to repay a loan. The longer the loan term, the lower your monthly payment, but the greater the amount you’ll pay over time. A shorter loan term is usually a better deal, but only makes sense if you can keep up with the higher monthly payments.
    • Loan amount: You might pay higher interest on a very large or very small loan. But remember that you need to repay everything you borrow with interest, so choose a manageable loan amount. You shouldn’t borrow more than you need just to get a lower interest rate.
    • Getting a co-signer: Some lenders may allow a co-signer. If you have a creditworthy friend or relative willing to back your loan, asking them to co-sign can get you a much lower interest rate. What’s more, paying back the loan on time will help you build credit for the future, so you may not need their help again.

    Check Your Personal Loan Rates

    Answer a few questions to see which personal loans you pre-qualify for. It’s quick and easy, and it will not impact your credit score.

    Get Started

    with our trusted partners at Bankrate.com

    Lindsay Frankel

    Contributing Writer

    Lindsay Frankel is a Denver-based freelance writer. She regularly contributes to several personal finance publications, including LendingTree and FinanceBuzz. When she’s not writing, you can find her enjoying the great outdoors with her rescue pup, playing music, or listening to audiobooks.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.