If you need a personal loan, you may be relieved to know that you can find options no matter your credit score. Lenders consider more than credit score for approval, and many do not set minimum credit score requirements, says Jeff Keltner, senior vice president of business development at online lender Upstart. “There are a wide range of lenders, and they have different risk tolerances,” Keltner says.
What Is the Minimum Credit Score for a Personal Loan?
The minimum credit score you need to be approved for a personal loan largely depends on the lender, says Rod Griffin, senior director of public education and advocacy for the credit bureau Experian. Good credit gives you the best odds of getting a personal loan at a low interest rate.
“Qualifying for a personal loan and getting the best rates are not the same thing,” Griffin says.
You could get a personal loan with a credit score of 550 or 600, but your options will likely be limited and costly.
Poor or fair credit scores are considered subprime. “You’ll have a harder time qualifying for a personal loan,” Griffin says.
Higher credit scores allow you to access loans with lower interest rates and better terms. “You could also qualify for a larger loan principal amount,” Griffin says.
That said, “Lenders set their approval criteria differently,” says Todd Nelson, senior vice president of strategic partnerships at LightStream, the online lending arm of Truist Bank.
Borrowers will need a minimum FICO score of 660 to obtain an unsecured loan from LightStream. “People should do their research to see which lenders may be appropriate for their financial situation.”
Some lenders could approve your personal loan based on a broader look at your finances, Keltner says. “By applying more sophisticated underwriting, we can extend credit to the consumer that needs it and doesn’t have that 740 credit score,” he says.
Average Credit Score Requirements for Personal Loans
You may be able to get a personal loan with a lower credit score, but a score in the good range of at least 670 should give you access to many options, according to credit bureau Experian.
Credit scores typically span from 300 to 850, with higher scores representing a better credit history and making you eligible for lower interest rates on loans, the Consumer Financial Protection Bureau says.
Lenders generally offer the best deals on personal loans to borrowers with the highest credit scores. On the other hand, lenders often charge more if your credit score is lower to offset the risk of default, and if your score is poor, you may not be approved for a loan. If your credit score is in the fair range, you may qualify for a personal loan but not the rate or amount you wanted.
What Are the Easiest Personal Loans to Get?
Online personal loans and peer-to-peer marketplaces that connect borrowers with investors who finance loans can be the easiest to get, Keltner says.
“For many online lenders, the only product they have is personal loans, so they can gather your information and give you an instant offer of credit using a soft credit pull that does not impact your score,” he says. “They will tell you what you qualify for, how much, and rates for different amounts and durations. Often, you can complete that end-to-end process in the same day or same sitting.”
Getting a personal loan could also be easier when you can prequalify, which checks your chances of approval before you apply. Prequalifying with several lenders can help you compare estimated rates and terms to find the best loan for your needs.
Can You Get a Personal Loan With Fair or Bad Credit?
If you have fair or bad credit, you may still be able to get a personal loan.
“Some lenders have more relaxed underwriting thresholds than others, so it might be worthwhile to explore your options with multiple lenders,” says Brian Walsh, certified financial planner and senior manager of financial planning at the finance company SoFi. “You can do this on your own by leveraging an online marketplace.”
Marketplaces like this “shop” for loans that match your needs. “You enter basic information like amount, purpose, location and credit score to see potential options from multiple lenders,” Walsh says.
Certain lenders will work with borrowers who have fair credit scores of 580 or 600. Here is what you can expect from a few online and marketplace lenders:
- Avant has products that fit a variety of credit situations, but most customers that receive personal loans have credit scores between 600 and 700.
- OppLoans makes lending decisions based on the applicant’s overall creditworthiness and ability to repay. A soft credit inquiry is used when you apply rather than a hard inquiry that can affect your credit score.
- Upstart may approve borrowers with insufficient history to generate a credit score.
How to Improve Your Credit Score
Establishing and maintaining a strong credit history, which results in a higher credit score, will position you to access the best personal loans. Your credit card balances matter to lenders because, Griffin says, “If you max out your credit, you’ll have less of an ability to pay on a personal loan.”
Here’s how you can improve your FICO score to get a personal loan:
- Pay bills on time. If you are having a tough time paying bills, contact your creditors before you fall behind to ask about relief programs that can keep your accounts current.
- Manage credit card balances. Aim to use no more than 30% of your available credit, and less is better for your credit score.
- Regularly check credit reports. Access free weekly credit reports online through December 2023 at AnnualCreditReport.com. If you notice suspicious activity on a credit card, report it immediately to the creditor.
- Build credit history. Think about trying Experian Boost, which is designed to raise your FICO score by giving you credit for cellphone and utility payments. This is a free service that will allow you to build credit with bills that don’t typically get reported to the credit bureaus.
Other Requirements for Getting a Personal Loan
In addition to a good credit score, borrowers may need to meet specific requirements to qualify for a personal loan. Requirements may vary by lender but can include:
- Income. The lender will want to see proof that you can repay the loan. A certain minimum household income may be required, and the lender may verify it to ensure that you can make the loan payments. Borrowers may need to provide pay stubs, tax returns or other documents to show income sources.
- Low debt-to-income ratio. Generally, the lower the DTI, the better, although your lender may have a standard you need to meet. Your DTI tells lenders how much of your monthly income goes toward paying debt.
- Savings or other cash sources. Lenders might ask for evidence of savings you could tap to cover loan payments if necessary.
- Collateral for a secured personal loan. The lender will require collateral, such as your car, home or a savings account, to back the loan. The downside is that you could lose the collateral if you default on the loan.
- Origination or application fees. You might have to pay these fees when you take out a personal loan, although you can find loans without them. Origination fees usually range from 1% to 6%, according to Experian.
Alternatives to Personal Loans
A personal loan may not be the most affordable or convenient option for you. In that case, you may want to explore some of these alternatives:
- Credit card. A 0% introductory annual percentage rate offer can allow you to pay down your balance during the interest-free period. But, Keltner says, “Be sure you are on top of your game, and pay it off.”
- Home equity loan or line of credit. If you need money quickly, one of these loans is probably not the best choice. A home equity line of credit, or HELOC, could take up to 60 days because it usually involves a home appraisal, Keltner says.
- 401(k) loan. You can borrow from yourself at a low interest rate, but those funds will miss out on returns. Also, you may contribute less to your fund while you have the loan.
Be sure to do your research and choose whatever makes the most sense for your finances.
Griffin adds, “Just as there are different tools for different jobs, the same is true for credit. A personal loan is something to consider if you know your income is stable and you will be able to pay off the debt.”