What is the Minimum Credit Score Needed for a Personal Loan?

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Edited byAmy Wilder

Updated: September 26, 2023

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Credit scores can range from 300 to 850. Depending on where it falls, your credit standing can be considered poor (anything under 580) or excellent (above 800).

When you're looking to apply for a personal loan, it's usually better if you have a good credit score. However, you can still get approved for a personal loan with a lower credit score.

Lenders use credit scores to gauge creditworthiness, so a higher figure indicates that you manage debt well. From a lender's perspective, that's a plus. They'll see you as a lower risk and will be more likely to approve your application. Additionally, there's a possibility they'll offer you better interest rates if your score is high.

Remember, lenders have different minimum credit scores for personal loans. When shopping around for quotes, it's best to understand all these terminologies, so you don't encounter surprises.


What Is a Personal Loan & How Can You Use It?

A personal loan is a financial product that allows you to borrow a specific amount from banks or other lending institutions. You can choose from different types of personal loans, most of which are unsecured. However, you must have collateral to take out a secured loan.

A perk of a personal loan is that there are very few restrictions on how you can use the funds. That said, it's smart to look into several factors, such as interest rates, loan amounts and origination fees.

Lenders may also have requirements regarding your age, credit score and income. These are common, but they may also look at other things. One section of our guide focuses on other factors that may lead lenders to approve or deny your application.

Typically, you go through four steps when you apply for a personal loan. You’ll begin by calculating how much you need. Once you know how much you want to borrow, it's best to check whether or not you're eligible for a loan. If you are, shop around for lenders — rates, repayment terms and fees vary between them. Last, choose the best lender for your situation and complete your application.

Where Can You Use a Personal Loan?

Personal loans are known for their flexibility. Although some lenders may have restrictions, most don't. MoneyGeek explores the most common ways you can use your personal loan.

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People often use personal loans to consolidate debt. For example, if you have balances on several credit cards, an auto loan and a mortgage, things can easily fall through the cracks. It's particularly true if you're dealing with multiple lenders and keeping tabs on different due dates.

You can use your personal loan to pay off most of your balances, especially your credit cards. As of May 2022, the average rate for credit cards is 15.13%. According to the Federal Reserve, a two-year personal loan has an average interest rate of 8.73%

Besides helping you save money, consolidating also makes the administrative aspect easier. You'll only deal with one lender and a single repayment schedule.

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You may not be able to purchase a luxury car using the funds from a personal loan, but it can usually cover a new refrigerator or stove. Using it for these may be more cost-effective than paying for them using a credit card.

However, you don't have to limit your purchases to household items. You can also use a personal loan to go on a vacation or cruise.

It can also fund that home improvement project you've been putting off. You can purchase the necessary materials and pay for labor while increasing your home equity.

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Not everyone wants to be an employee all their life — if you're ready to start your own business, you'll need some capital. A personal loan could be a solid option to get you started. You can also use part of the funds to make investments in other businesses.

However, using a personal loan for business may not always be the best option. It's best to check whether or not your lender has restrictions and if these include business ventures or investments. Lenders that impose limitations include Upgrade, American Express and Truist.

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Even if you have health insurance, a medical emergency might require you to dip into your savings. There may be additional expenses for your deductible and maximum out-of-pocket limit. The funds from a personal loan can take care of these expenses.

Whether it's a one-time medical emergency, like surgery, or a condition that requires a series of treatments, a personal loan can help.

However, high-interest personal loans may not be the best option to cover these expenses. Many healthcare providers offer payment plans or other options to ensure that medical debt doesn't become too high of a burden.

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Moving to a new home — whether in a different city or state — can be expensive. A personal loan can help you cover those costs.

There are other life events that a loan can help you cover. You can use a personal loan to fund your wedding, reception and even your honeymoon.

For some, a loan can tide them over when shifting careers. Extra cash can relieve some stress from jumping from one job to another.

Minimum Credit Score Needed for a Personal Loan

If you're wondering what the minimum credit score needed for a personal loan is, there is no straightforward answer. Lenders set different credit score requirements, but a score of at least 580 may qualify you for a personal loan. Those with scores that fall between 600 to 700 have better chances.

Remember, you may have more than one credit score. One factor is that there are different agencies providing scoring models. Take FICO and VantageScore, for example. A credit score of 668 is good with VantageScore but only fair with FICO.

Sometimes, credit bureaus receive different information. One lender may report your payments to Experian, Equifax and TransUnion, while another lender only reports to the first one. This leads to having varying credit scores even if the bureaus use the same scoring model.

Did you know you can get a credit report without spending a dime? You can get yours once a year through AnnualCreditReport.com. The process consists of filling out a form, choosing which credit bureau's report you want and answering some questions. You can review your credit report online or print it. You can also get an estimate of your credit score from Credit.com, Lending Tree, Credit Karma and other similar sites by signing up for their services.

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Part of understanding your credit score is knowing what factors affect it. Your FICO scores may increase or decrease depending on these five aspects:

  • Payment History: Your ability to pay your debt on time plays a significant role in your credit score. Late or missed payments may pull your credit score down.
  • Credit Utilization Ratio: This factor focuses on how much of your credit line you're using. Keeping credit utilization below 30% is best — anything higher impacts your credit score negatively.
  • Length of Credit History: This is the length of time you've had credit accounts. The longer your history, the better your credit score.
  • Credit Mix: The more variety you have for your credit accounts, the better. Don't just stick to using credit cards. Taking out an auto or personal loan can help your credit standing.
  • New Credit: Acquiring too much new debt increases your risk level. It could drag your credit score down.
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When applying for a personal loan, your credit score can affect several things. Here are some of them:

  • Eligibility: A low credit score may disqualify you from a loan. Lenders set different minimum credit score requirements for personal loans. If yours falls short, a lender will likely deny your application.
  • Loan Amount: Some lenders accept applications from borrowers with fair or poor credit scores. However, since lenders see you as risky, they may limit the amount you can borrow.
  • Interest Rate: Lenders view borrowers with good credit scores as more likely to pay on time, so they offer lower rates. Your lender is more likely to charge more interest if you have a low credit score.
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A poor credit standing isn't ideal when applying for a personal loan, but qualifying isn't impossible. Here are several things to help you get a personal loan with a low credit score.

  • Check Your Credit Score: Start by figuring out your actual score. Falling within the "fair" range may limit your options, but being within the "bad" range gives you fewer still. However, you can sometimes qualify for a personal loan with bad credit
  • Review Lender Requirements: Narrow your options by looking at lenders' personal loan minimum credit score requirements. This way, you won't waste your time on those for which you won't qualify.
  • Compare Lenders: On your short list of lenders, compare their offers. You may find that some offer more manageable rates than others.
  • Consider Alternatives: You may have better luck with credit unions and peer-to-peer lenders than banks. However, avoid payday loans because these charge astronomical interest rates.

Understanding How Your Credit Score Works

A credit score represents your financial history. The higher your score, the more it indicates a good record of paying debts and other financial obligations. It affects several things, such as car insurance premiums and loan insurance rates.

There are two major scoring bodies — FICO and VantageScore. They consider the same factors when calculating credit scores but use slightly different ranges.

Your FICO score comprises five areas. These are:

  • How consistent you are with your payments (35%)
  • How much of your credit you've used (30%)
  • How long you've had credit accounts (15%)
  • How many kinds of debts you have (10%)
  • Whether or not you've acquired new debt (10%)
How Your Credit Scores Impact Your Personal Loans

Additional Factors That Influence Approval

Lenders set a minimum credit score requirement for personal loans because it's one factor that affects their decision. However, it isn't the only one. A good credit score makes approval more likely, but not guaranteed.

Lenders typically consider other factors, such as the following:

  • Employment History & Income: Some lenders have an income requirement. They need assurance that you have the means to repay your loan. A stable job means you're more likely to fulfill your financial obligations.
  • Debt-to-Income Ratio: This refers to the portion of your income that goes into debt repayment. Ideally, lenders prefer your debt-to-income ratio to be between 35% and 40%, If you're already spending a lot of your revenue on existing debt, you might not be able to manage your finances if you add a new loan to your list.
  • Presence of a Co-signer: If you know your credit score is less than ideal, having a co-signer may influence lenders to approve your application. However, your choice of co-signer counts a lot. It's best if their credit score is within the very good or excellent ranges.
  • Your Collateral's Value: Some personal loans are secured, so you must put up collateral. Remember, if you default on your payments, your lender can repossess the possession you use as collateral. The higher your collateral's value, the more likely you'll be approved.
  • Origination Fees: Some lenders charge a portion of your loan amount to cover processing and administration fees. This may range between 1% and 8% — be sure to consider this, especially if you’re only borrowing enough to cover your needs.

How to Improve Your Credit Score Before Applying

Although it might take some time and effort, it is worthwhile to work to improve your credit score. A good score can yield better results for your personal loan application, including having more lender options and better rates. MoneyGeek's guide explores several techniques you can use.


Make consistent bill payments

Your payment history makes up the most significant part of your FICO score. Ensuring you don't miss any due dates can help pull up your credit score.


Lower credit utilization rate

After your payment history, your credit utilization rate is the area with the highest impact on your credit score. Reducing utilization means you're not overusing available credit lines.


Review and monitor credit reports

The details of your credit report can give you a better idea of what's pulling your credit score down. When you've determined the reason, you can apply specific strategies to improve it.


Avoid credit card applications

Credit card issuers do hard credit checks as part of their application process. This causes your credit score to lower slightly. One application may not make a considerable change, but if you apply for several, you're more likely to feel their effect.


Deal with delinquent accounts

The more outstanding balances you have, the more challenging managing your finances becomes. Once you address these, your credit score may increase if you make timely payments.

Frequently Asked Questions About Personal Loans

The subject of personal loans is extensive, and MoneyGeek researched the commonly asked questions prospective borrowers ask. These may help you make better financial decisions.

It’s best to have the following documents ready if you’re applying for a personal loan:

  • A completed loan application form
  • Proof of identity (Social Security card, U.S. passport or driver's license)
  • Proof of employment and income (bank statements, tax returns and pay stubs)
  • Proof of address (utility bills)

The time it takes for lenders to approve your loan application may vary. Online lenders typically decide within three business days. Credit unions and banks may take up to one week.

Lenders offer differing repayment terms, ranging from 24 to 60 months. However, some lenders have terms outside this range. For example, Fifth Third Bank offers 12-month terms, while Upgrade's are as long as 84 months.

Getting a loan with fixed-rate interest makes it easier to determine how much you need to pay each month. You can use a loan calculator to compute your monthly payments, but it's simple enough to do it independently.

MoneyGeek's guide on calculating your loan payments walks you through the entire process.

Like loan terms, borrowing limits vary between lenders. Upgrade allows you to borrow between $1,000 and $50,000, while Rocket Loans’ limits stretch from $2,000 to $45,000. Some lenders, like Lightstream, offer personal loans up to $100,000.

The Federal Reserve puts the average interest rate for 24-month personal loans to be 8.73% as of May 2022. However, don't forget that lenders might offer you a different rate based on your unique profile.

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The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.