What Credit Score Is Needed for a Personal Loan?

A personal loan typically requires a fair credit score or better to be approved. FICO defines "fair" credit as a score of at least 580.

A low credit score will affect how much you can borrow with a personal loan. Your options will be limited and your interest rates will be high. Your best chance at success is to wait until you've got a "good" credit score — 670 or above, which will provide a lower APR and a better choice of lenders.

Here's the thing, though: A credit score is just one factor that financial institutions weigh when deciding whether to extend a loan to you. Details like income, credit history and current debt are important as well.

Curious about what personal loan offers are available to you? MoneyLion helps you find personal loan offers based on your background and info you provide. You can get matched with offers for up to $50,000 from top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Credit Score Ranges and Loan Options

Your credit score is like a report card that lenders can look at to gauge how risky of a borrower you are. If it's low, that's a signal that you may have either limited or blemished credit history.

• Poor credit: 300 to 579. You'll have a tough time getting approved for any loan with a "poor" credit score.

• Fair credit: 580 to 669. You may be approved for a loan if you have other things going for you, such as steady income and little debt.

• Good credit: 670 to 739. Most loans are likely within your reach, though you may still not receive the most favorable APR.

Any credit score above that often yields the best interest rates. Here's a more complete overview:

Other Factors That Affect Your Eligibility For a Personal Loan

Your credit score is an important factor in your eligibility for a personal loan, but other things matter, too.

Income level

Income plays a part in your approval odds and your interest rate when it comes to a personal loan. You might have the credit score to get approved for a loan, but if your income does not reflect your ability to pay it off on time, lenders may avoid lending to you or approve you for a lower amount. Don’t let your income deter you, but remember that it does play a role in your approval. 

Collateral

If you are getting a secured loan, you need collateral. Collateral might be a vehicle, house, or cash savings. Much like income, your collateral must be sufficient to make lenders comfortable about taking a risk with you. That means the value of the collateral could cover the loan if you default.

Debt-To-Income Ratio

Your debt to income (DTI) ratio is how much you owe compared to how much you bring in each month. It is determined by adding up your monthly debts and dividing them by your gross income. Most lenders seek a DTI of 36% or lower.

How To Get a Personal Loan With a Low Credit Score

If your credit score isn’t where it needs to be, consider these ways to get a personal loan. 

Consider a Co-Signer

A co-signer signs onto your loan, agreeing to pay the loan back if you can’t. Your co-signer would need to have credit good enough to get approved.

Being a co-signer is a big responsibility that should not be taken lightly. If someone agrees to be a co-signer, they agree to pay the loan if you default. 

Opt For a Credit Builder Loan

Credit builder loans are a great way to get the extra funds you need while helping build your credit. You can usually borrow $1,000 or less with a credit builder loan. Once you get the loan, you make monthly payments toward the amount. Your monthly payment could also include fees and interest. Once the balance is paid, you can access the funds. 

Your payment history is reported to the credit bureaus showing that you can manage loan payments, thus helping to increase your credit score. Making your payments on time with all loans is essential, and a credit builder loan is no different. It’s a chance to increase your credit score while getting access to cash. 

Look Into 0% APR Credit Cards

If you don’t have the credit score for a loan but qualify for a credit card, consider a card with a 0% APR intro promo as a way to borrow money. Some cards let you carry a balance and they don't charge you interest. However, this period usually ends after 12-24 months.

After the promotional period ends, you'll be charged interest on whatever is left on the card. This could mean paying over 20% in interest, so it's really important you pay off the balance before the promo ends.

Explore Peer-To-Peer Lending

Peer-to-peer lending, or marketplace lending, is a nontraditional method of loaning money. With peer-to-peer lending, you receive a personal loan from an investor instead of using traditional banks or financial institutions.

You complete an application through a peer-to-peer lending company, and the company can then connect you to lenders. One thing to keep in mind is that peer-to-peer lenders often have higher interest rates than banks.

How To Improve Your Credit Score For a Personal Loan

If you aren’t in a hurry to get your loan, consider improving your credit score to increase your approval chances. Bear in mind, improving your credit score can take time.

Cut Down Your Spending 

Try to reduce your spending to increase your savings or disposable income. This change can give you access to additional cash, allowing you to pay down other debts or potentially reduce the need for a loan in the first place.

A monthly budget can help. You could start seeing improvement in just a few months.

Pay Your Bills on Time

Payment history plays a significant role in determining your credit score. When you consistently pay your bills on time, you'll see a boost in your credit score.

Set reminders and alerts, or sign up for autopayments to ensure your payments get submitted on time, every time.

Monitor Your Credit Report

Monitoring your credit report is crucial to staying on top of your credit score. Go to AnnualCreditReport.com for your free credit report.

Accessing your credit report lets you make sure your credit information is accurate and stay on top of possible identity theft. Having inaccurate information on your report affects your credit score, so you want to catch errors early and avoid a bigger mess. 

Is Your Credit Score Good Enough For a Loan? 

If you feel like your credit score won't get you the best loan terms, consider alternate methods. If you want to focus on building your credit, you can do that too. Start by setting and following a budget and paying bills on time. Check your credit report and make sure the information is correct. 

FAQs

Why do I need good credit for a personal loan?

Good credit is an indicator to lenders that you are financially responsible and will pay your loan on time. 

Can I get a personal loan with a 650 credit score?

A credit score of 650 is considered a Fair score and should give you access to most personal loans. Creditors look at factors such as income and debt, too. 

Can I get a personal loan with bad credit?

Getting a personal loan with bad credit could be challenging. Consider other options like a credit builder loan or getting a co-signer if you need a loan.