What Credit Score Is Needed for a Personal Loan?

Personal loans are a flexible form of financing that you can use for almost any expense, including home improvement, medical bills, and debt consolidation. They offer a lump-sum amount upfront that you can pay back monthly over several years. 

To qualify for a personal loan, you’ll need to meet a lender’s requirements for credit, income, debt-to-income (DTI) ratio, and other criteria. Your credit score is especially important since it signals to a lender your likelihood of paying the loan back. 

In fact, your credit score can make or break your approval for a personal loan, as well as impact the rates, terms, and loan amount you qualify for. Read on for a closer look at the credit score you need for a personal loan, along with tips on qualifying and other factors that determine approval. 

What credit score is needed for personal loan approval?

When considering your application for a personal loan, most lenders look at your credit score, among other factors, to determine the risk associated with loaning you money. There are multiple credit scoring models, but lenders commonly look at FICO scores, which range from 300 to 850. (VantageScores are another popular model and have the same range.)

The minimum credit score for a personal loan varies by lender, but most want to see at least fair or good credit to qualify. On the FICO scoring model, fair credit starts at 580, and good credit starts at 670. 

FICO credit score ranges: 

• Poor credit: < 580 
• Fair credit: 580 – 669
• Good credit: 670 – 799
• Exceptional credit: 800+ 

Your credit score represents the information in your credit report, which is put together by the major credit bureaus, Experian, Equifax, and TransUnion. FICO credit scores are calculated based on the following categories:   

• Payment history (35%): The largest category is based on your record of paying back your creditors. On-time payments boost your score, while late or missed payments damage it. 
• Amounts owed (30%): The amount of debt you owe also impacts your score, as does your credit utilization ratio, or the amount of credit you’re using compared to how much is available to you. Try to keep your credit utilization under 30% to protect your score. 
• Length of credit history (15%): A longer credit history is better for your score. 
• Credit mix (10%): Having a mix of credit, such as installment loans and revolving credit, can also positively impact your score. 
• New credit (10%): Recently taking out loans or other debt can negatively impact your credit and be a red flag to lenders. 

A low credit score suggests you may be a risky candidate for a loan, while a high credit score indicates you handle credit responsibly and pay your debts on time. There are a few ways you can check your credit score, including: 

• Use a free credit monitoring service
• Check with your credit card issuer 
• Purchase your FICO scores from myFICO.com 

You may not have a credit score if you’re young or haven’t opened any credit cards or loans yet. Not having a credit score can make it tough to qualify for a personal loan, but you may still have options if you can apply with a cosigner or find a lender that uses an alternative lending model. 

Lender	Minimum credit score	Rates (APR)
SoFi	680	8.99% – 25.81%
LightStream	Not disclosed	7.99 – 25.49
Upgrade	560	8.49% – 35.99
LendingPoint	Not disclosed	7.99 – 35.99
Achieve	620	7.99 – 35.99
Best Egg	640	8.99 – 35.99
Upstart	300	5.2% – 35.99%
Happy Money	640	11.52 – 24.81

Personal loans for poor credit

Having poor credit can make it challenging to get approved for a personal loan. Even if you are approved, you may get stuck with an interest rate on the high end of a lender’s range, which could go up to 36%. 

However, there are steps you can take to boost your chances of approval or access lower rates, including: 

• Improve your credit score before you apply. If you don’t have an immediate need for a loan, take some steps to improve your credit score before you start loan shopping. These could include making on-time payments on your debts, paying down balances, and reducing your credit utilization. You may also review a free copy of your credit report from AnnualCreditReport.com and dispute errors you find, if any. 
• Apply with a cosigner. Some lenders let you submit a joint application with a cosigner or co-borrower. If your cosigner or co-borrower has good credit, you may have a better chance of getting approved or snag a better rate. Keep in mind that both your and your joint applicant’s credit will be impacted by the personal loan and how you pay it back. 
• Consider a secured personal loan. Most personal loans are unsecured, but some lenders offer secured options that you back with collateral, such as a car or savings account. Since lenders see secured loans as less risky, they may accept lower credit scores and offer better rates and higher loan amounts. However, you risk losing your asset if you fall behind on payments.

Some lenders to explore if you have bad credit include Upstart and Upgrade. For more options, check out our guide to the best bad credit loans.

Ask the expert

Eric Kirste

CFP®

If conventional lenders reject your application for a loan, try peer-to-peer lending. These companies still check your credit score when you apply, and you can use the borrowed money for various purposes. The worse your credit score, the higher your interest rate will be, and you may still not get approved.

Personal loans for fair credit

Having fair credit will give you more options for personal loans and improve your chances of approval, and you won’t get the highest rates. According to the Federal Reserve, the average rate on a two-year personal loan is 12.17%. 

Some lenders that accept fair credit include Upgrade, Achieve, Best Egg, Upstart, and Happy Money. Some of these lenders let you check your rates through prequalification, which won’t impact your credit score, so it’s worth shopping around to find your best personal loan offer. For more options,  check out our selections for the best fair credit loans.

Personal loans for good credit

Borrowers with good credit will have an easier time getting approved for a personal loan and have access to a wider range of lenders. If you have very good or exceptional credit, you could qualify for a lender’s best rates, which typically start around 8% or 9%, but may start lower or higher depending on the lender. 

Having good credit also makes it easier to qualify for the loan amount and repayment terms you want. With its minimum credit score of 680, SoFi is one lender that caters to borrowers with good credit. Again, comparing offers from multiple lenders can help you find the most affordable loan. 

Learn more about the best good credit loans here.

How to qualify for a personal loan

While every lender sets its own specific borrowing criteria, taking these steps can help you qualify for a personal loan. 

Check your credit

Review your credit score and look over your credit report for any errors or areas where you can improve. Knowing what shape your credit is in before you start applying can help you narrow down your list of lenders and find one that could be a good fit. 

As mentioned, you might also take steps to improve your score before you apply, as a higher credit score could open up the door to more loan offers and better rates. For example, consider applying for a secured credit card that will report actively to the major credit bureaus.

If you are repairing damaged credit, be patient. It takes time for negative items to fall off your credit history.

Eric Kirste

CFP®

Research lenders

Banks, credit unions, online lenders, and peer-to-peer lenders all make personal loans available, but some have strict qualifying requirements, while others offer bad credit loans at higher rates. Come up with a list of lenders that could be a good match for your financial profile. 

Consider checking with your current bank, too, as some institutions offer interest rate discounts or higher loan amounts to existing customers. 

Prequalify for personal loans

Some personal loan providers let you check your rates through prequalification. You’ll fill out a quick online form and see whether you prequalify instantly. The lender will only run a soft credit check, so prequalifying for a loan won’t harm your credit. It also doesn’t obligate you to accept any of your loan offers. 

Remember, though, that your rates could change after you submit an official application and the lender runs a hard inquiry on your credit. 

Read More

How to Get a Loan With No Credit Check

Other factors that determine approval

While your credit score is a major factor in qualifying for a personal loan, it’s not the only one. Lenders also look at some other financial characteristics, including:

• Income: Lenders want to know you have a reliable source of income and so may require pay stubs or tax returns.
• Debt-to-income ratio: Your DTI compares your monthly debt obligations with your income. Lenders usually prefer a DTI lower than 36%.
• Repayment history: Lenders will look carefully at your payment history on your credit report to assess the likelihood you’ll repay a loan.
• Free cash flow: Lenders may review your bank account transactions to ensure you have enough money left over each month to afford a personal loan payment. 
• Verifiable bank account: Lenders generally want you to have a bank account where they can send the loan proceeds. 

If you pursue a secured loan, you’ll also have to pledge collateral with sufficient value to back the loan. Borrowers applying jointly will also need to provide information on their cosigner or co-borrower, since the lender will take both applicants’ financial profiles into account. 

Adding a cosigner with a good credit score and an established credit history can allow you to qualify for a lower rate or get approved.

Eric Kirste

CFP®

Finally, you’ll have to meet a lender’s requirements for age (usually 18 or older) and residency, as some lenders only operate in certain states. Lenders typically require verifying documentation when you apply, such as proof of address, pay stubs, or bank statements. 

How do you apply for personal loans?

When you’ve shopped around among lenders and found the right one, you’re usually able to apply online and can often get a decision within minutes. However, some small local banks or credit unions may require you to visit a branch to apply for a loan.

The steps to apply may include: 

• Fill out an application. You’ll provide your personal and financial details, such as your address, income, requested loan amount, and loan purpose. 
• Provide the required documentation. This might include pay stubs, bank statements, tax returns, identification, and proof of address. 
• Consent to a hard credit check. Submitting an official application usually involves agreeing to let the lender run a hard inquiry on your credit. 

If your loan is approved, you’ll sign your final loan agreement and receive the funds to your bank account. Some lenders can fund loans as soon as the same or the next business day after you’re approved. 

You’ll also start paying the loan back on a monthly schedule on your agreed-upon terms. Consider setting up automatic payments from your bank account so you don’t miss any bills. 

FAQ

Does applying for a loan affect my credit score?

Applying for a loan can affect your credit score. If a lender runs a hard credit inquiry, your score could decrease by a few points. However, the damage should be temporary, and your score can bounce back in a few months if you make on-time payments on your debts. 

What’s the difference between a soft and hard credit inquiry?

The difference between a soft and hard credit inquiry mainly lies in how each impacts your credit. A soft credit inquiry, also known as a soft credit check or pull, won’t affect your credit scores or show up on your report. Lenders may run a soft check when you prequalify for a loan to get a sense of your credit.

A hard credit inquiry, on the other hand, can decrease your credit score by a few points and show up on your credit report. Lenders typically run a hard credit check (with your consent) when you apply for a loan or credit card. The damage to your score shouldn’t last too long, though, if you make on-time payments on your debts. 

Can I do anything to help improve my loan terms?

Improving your credit score can help you get better loan terms. Lenders typically offer the best rates to borrowers with good or exceptional credit. Your loan amount and repayment terms can also impact your interest rate, so it’s worth adjusting your loan size and terms to see which could get you the best rate. 

Do any lenders offer no-credit-check personal loans?

Most reputable lenders check your credit before offering you a personal loan. That way, they can assess your risk as a borrower and the likelihood of paying back the loan. If you come across a no-credit-check personal loan, you may be encountering a payday loan, which could have exorbitant interest rates and fees. 

That said, there are some alternative financing options that don’t involve a credit check. For instance, you may be able to get a small loan or paycheck advance through an app or qualify for buy now, pay later (BNPL) financing without a credit check.