What credit scores do I need to get a personal loan?

 

When you apply for a personal loan, lenders may check your credit scores.

Your credit score is a number that is calculated from your credit reports. It measures factors like how you've managed your finances in the past and helps lenders predict whether you'll make payments in the future.

Credit scores are important because most lenders use them to help determine if you're approved for a loan, what interest rate they charge, and what the loan amount is.

Your credit scores aren't the only factor lenders take into account when evaluating your credit profile and deciding whether or not to approve a personal loan application. There is no exact score that guarantees you will be approved or offered a good interest rate.

There are companies that offer loans to people with credit scores that are in different ranges, but you are more likely to get a lower interest rate and better terms if you have higher credit scores.

What credit scores do I need to get a personal loan?

The minimum credit score you need to be approved for a personal loan depends on the lender. Some define their requirements upfront. For example, Payoff says applicants must have a FICO® Score of at least 600 and Upstart requires a FICO or VantageScore of 600 (terms may be different if you're applying through Credit Ease).

Others give a range of scores for applicants who are approved: Avant says people who get loans typically have credit scores between 600 and 700.

Some lenders do not disclose minimum credit requirements until applicants go through a prequalification process or apply for a loan. In some cases, you can find information about approved applicants' credit scores.

What factors affect my credit scores?

There are many different credit scores, and the factors that affect your scores can vary depending on which scoring method is used. These are some of the most common factors.

• Payment History: Both FICO and VantageScore look at your payment history to see if you have a good record of being on time. Making full and timely payments helps improve your score.
• Available Credit Utilization: The proportion of credit you use also affects scores in both models and getting close to the available limit can lower your scores. Paying off credit card debt so you don't owe more than 30% of your credit limit can help.
• Account age and mix: Having an established credit history and using a mix of different types of credit, such as installment loans and credit cards, can have a positive effect on your scores. On the other hand, if you have recently opened a lot of new accounts your score may drop.

If your credit scores are low, it is recommended that you work on improving them before applying for a loan.

If you're having trouble paying a bill when it's due, request a payment plan so your account doesn't end up in collections.

Verify that the information on your credit reports is correct. Request a copy of each of your reports and contact the credit bureaus if you find any errors.

What loan characteristics should I compare before requesting a personal loan?

Before you sign a personal loan contract, compare typical expenses and costs.

• Interest rate: Look at both the interest rate and the effective annual rate, or APR, of the loans you are considering. The APR will include fees and interest and will give you an idea of ​​the affordability of the loan.
• Fees: Fees can add up, so check the most common: late payment, payment processing, and the loan prepayment penalty Consider loan origination fees, which are the fees charged for originating the loan and are usually a percentage of the total loan amount.
• Length of the loan: Compare the amount of time you will have to repay the loan and the amount of the monthly payments.
• Total loan amount and interest: For each loan, calculate the total amount you would have to pay in interest over the life of the loan.
• Collateralized or Co-Owner Loan Option: See if lenders allow you to add to collateral or if you can apply for the loan with someone else. Having a cosigner with better credit than you can help you get approved for a loan you might not otherwise be able to get or help you get a better interest rate.

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When you apply for a personal loan, lenders may check your credit scores.

Your credit score is a number that is calculated from your credit reports. It measures factors like how you've managed your finances in the past and helps lenders predict whether you'll make payments in the future.

Credit scores are important because most lenders use them to help determine if you're approved for a loan, what interest rate they charge, and what the loan amount is.

Your credit scores aren't the only factor lenders take into account when evaluating your credit profile and deciding whether or not to approve a personal loan application. There is no exact score that guarantees you will be approved or offered a good interest rate.

There are companies that offer loans to people with credit scores that are in different ranges, but you are more likely to get a lower interest rate and better terms if you have higher credit scores.

What credit scores do I need to get a personal loan?

The minimum credit score you need to be approved for a personal loan depends on the lender. Some define their requirements upfront. For example, Payoff says applicants must have a FICO® Score of at least 600 and Upstart requires a FICO or VantageScore of 600 (terms may be different if you're applying through (Credit Repair Ease).

Others give a range of scores for applicants who are approved: Avant says people who get loans typically have credit scores between 600 and 700.

To get a general idea of ​​whether your credit score is high enough to be approved for a personal loan, see what ranges your score falls in.

If you are not sure if you can get an unsecured personal loan, you can also consider putting up collateral and applying for a secured loan.

What factors affect my credit scores?

There are many different credit scores, and the factors that affect your scores can vary depending on which scoring method is used. These are some of the most common factors.

• Payment History: Both FICO and VantageScore look at your payment history to see if you have a good record of being on time. Making full and timely payments helps improve your score.
• Available Credit Utilization: The proportion of credit you use also affects scores in both models, and getting close to the available limit can lower your scores. Paying off credit card debt so you don't owe more than 30% of your credit limit can help.
• Account age and mix: Having an established credit history and using a mix of different types of credit, such as installment loans and credit cards, can have a positive effect on your scores. On the other hand, if you have recently opened a lot of new accounts your score may drop.

If your credit scores are low, it is recommended that you work on improving them before applying for a loan.

If you're having trouble paying a bill when it's due, request a payment plan so your account doesn't end up in collections.

Verify that the information on your credit reports is correct. Request a copy of each of your reports and contact the credit bureaus if you find any errors.

What loan characteristics should I compare before requesting a personal loan?

Before you sign a personal loan contract, compare typical expenses and costs.

• Interest rate: Look at both the interest rate and the effective annual rate, or APR, of the loans you are considering. The APR will include fees and interest and will give you an idea of ​​the affordability of the loan.
• Fees: Fees can add up, so check the most common: late payment, payment processing, and the loan prepayment penalty. Consider loan origination fees , which are the fees charged for originating the loan and are usually a percentage of the total loan amount.
• Length of the loan: Compare the amount of time you will have to repay the loan and the amount of the monthly payments.
• Total loan amount and interest: For each loan, calculate the total amount you would have to pay in interest over the life of the loan.
• Collateralized or Co-Owner Loan Option: See if lenders allow you to add to a collateral or if you can apply for the loan with someone else. Having a cosigner with better credit than you can help you get approved for a loan you might not otherwise be able to get or help you get a better interest rate.

What's Next?

Consider how taking out a personal loan will affect your credit. For example, making payments on time can help build your payment history, which can improve your credit score. On the other hand, taking out a new loan can increase your total debt, which can lower your score.

Use a credit score simulator to explore how these factors might affect your scores and to estimate the likelihood that your scores will change after you apply for a loan.

Lastly, before you apply, gather the information you need for the application process. In addition to your name, address, and phone number, lenders may ask for your Social Security number, the name and contact information of your employer, a document verifying your income, how long you have lived at your current address, and your monthly housing expenses.

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