What Credit Score Do I Need to Get a Personal Loan?

credit score for personal loan

Need to finance a big purchase? A personal loan might be an option to explore.

As the name implies, lenders make personal loans to individuals for a variety of personal reasons. You might borrow money to start a business, adopt a child, or simply get through an emergency situation that your monthly budget can’t cover.

Personal loans are unsecured, meaning they’re not tied to any collateral (like your home or car). If you default on the loan, there’s not an immediate asset the lender can seize instead.

This makes personal loans a little riskier for the lender. As a result, they want to take a good look at your credit before approving you.

You need a good credit score for personal loan products, along with a few other things lined up and ready to go before you consider this financing option.

Get prepared before you apply

The first thing you should prepare is a good reason. This isn’t necessarily for the lender: It’s for you.

Make sure you truly need to borrow money before you take out a loan. Remember, there’s a cost to borrowing — the interest you pay on the loan amount. And interest rates tend to run higher on personal loans than other kinds of secured debt.

In most cases, saving up for what you want to buy makes more sense than spending money to borrow a loan. But if you explore your other options and determine a personal loan is the way to go, you’ll need a certain minimum credit score for personal loan applications.

The right credit score for personal loan products

With a great credit score, you’ll likely have no trouble getting the loan you want with a lower interest rate. But with poor credit, you may have a harder time finding the option you want.

Find your credit score in the ranges below to get an idea of what you can expect if you apply for a personal loan:

If your score is 800 or higher

According to Experian, only 1% of consumers with this kind of credit score will become delinquent in the future. That means you don’t pose much of a risk to lenders and it’s easy to qualify for new credit.

You should have no problem qualifying for a personal loan with this score. Make sure you shop around for rates, as lenders will likely offer you competitive options thanks to your high credit score.

If your score is 740 to 799

Your score is better than average, and you should also be able to easily qualify for a personal loan. You’ll likely get lower interest rates, too.

If your score is 670 to 739

This score is still in the “good” range, and you look like an average and acceptable borrower to lenders. You may have a harder time qualifying for the loan you want, but that doesn’t mean getting a personal loan is impossible.

With a score in this range, lenders may also take a closer look at other factors to determine how creditworthy you are. If you have a strong income, low existing balances, and only want to borrow a small sum of money, you may have a better chance of qualifying even with a credit score on the lower end of the range.

If your score is 580 to 669

This is a below-average credit score and borrowers at or below this number are considered “subprime.” This means it’s more difficult to get approved. If you do qualify, your interest rate will likely be really high.

Again, you can increase your chances for approval if you only apply to borrow a small sum of money and have little existing debt. But still expect to pay for your lower score in the form of a higher interest rate.

If your score is 579 or lower

This is considered a poor credit score. If you fall in this range, your score probably does not meet the minimum credit score for personal loan applications. You might want to consider other options or take steps to improve your credit before you apply.

Or, you could consider getting a cosigner. This might increase your chances of approval, but think this through carefully. There are some downsides to cosigning, so make sure you explore all other alternatives first.

How a personal loan compares to other options

Because personal loans are unsecured, you usually need a higher credit score to get approved and be offered the best interest rates available. If you struggle to maintain a great score, you might want to look at other financing options.

Credit cards are the easiest type of credit to get approval for, but the kind of credit card you can get will depend on where your score falls on the scale from poor to excellent.

Your credit score will also influence your interest rate with a card. You may get approved with a below-average or poor score, but your interest rate could be extremely high.

You can likely get the credit card you want (although the interest rate will vary) with a credit score of 650 or higher. If your score is lower, consider a secured card instead.

(The same credit score range is needed for most traditional mortgage loans, too — although some special options, like FHA loans, may allow you to get a mortgage with a score below 650.)

Look into peer-to-peer lending if you don’t have the minimum credit score for personal loan products. This is where other individuals make loans to people like you. These are a type of personal loan, and you’ll need a credit score of 640 or higher to qualify.

Increase your credit score for a personal loan

Want a personal loan, but your credit score doesn’t make the cut? You can take action to improve your score.

Lenders base approval for personal loans and other financing options on your creditworthiness. Your credit score is an indication of that factor.

To increase your score, you can take actions that demonstrate your creditworthiness and ability to manage different kinds of lines of credit. Specifically, you can focus on building a positive payment history by paying down existing balances.

Here’s what to do to get the credit score needed for personal loan products:

  • Make all payments on statements, loans, credit cards, and bills on time. You also want to pay the full amount due.
  • Keep the amount of credit you use low, relative to the amount of credit you have available. This is your credit utilization ratio, and it makes up a big chunk of your credit score. Aim to keep your ratio at 30 percent or lower on revolving lines of credit (like credit cards).
  • Don’t open lots of new accounts all at once, or allow hard inquiries to hit your credit report. Doing so right before you apply for a personal loan can hurt you, as each inquiry dings your score for a period of time.

If you can take these steps consistently, your credit score should improve over time. Once your score is up, you can apply and qualify for the personal loan you want.

Interested in a personal loan?

Here are the top personal loan lenders of 2017!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

2 Important Disclosures for Citizens Bank.

SoFi Disclosures

1

Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

Personal Loans: ​​*Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.17% APR to 11.32% APR (with AutoPay). SoFi rate ranges are current as of July 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.99% APR assumes current 1-month LIBOR rate of 1.22% plus 3.95% margin minus 0.25% autopay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.


Citizens Bank Disclosures

1

Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of July 1, 2017, the one-month LIBOR rate is 1.22%. Variable interest rates range from 6.01% - 15.96% (6.01% - 15.96% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% - 16.24% (5.99% - 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5.67% - 29.99%$1,000 - $50,000Visit Upstart
5.17% - 14.24%1 $5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$5,000 - $50,000Visit LendingClub
5.25% - 12.00%$2,000 - $50,000Visit Earnest
Advertiser Disclosure

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Published in Credit Score, Debt, Personal Loans