Good credit is a golden ticket to getting a personal loan, but it’s not the only factor lenders consider. In fact, a number of lenders don’t set minimum credit score requirements, says Jeff Keltner, senior vice president of business development, Upstart.
“There is a wide range of lenders, and they have different risk tolerances,” says Keltner.
Personal loans are “not the solution for everyone, but they can be quick and easy to obtain and relatively inexpensive compared to credit cards,” says Keltner.
Here’s what you need to know about your credit score and how to qualify for a personal loan.
[Read: Best Personal Loans.]
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 Experian credit bureau. Good credit gives you the best chance of getting a low interest personal loan.
“Qualifying for a personal loan and getting the best rates isn’t the same thing,” says Griffin.
You could get a personal loan with a credit score of 550 or 600, but your options will likely be limited and expensive.
Poor or fair credit scores are considered subprime. “You’ll have a harder time qualifying for a personal loan,” says Griffin.
Higher credit scores allow you to access loans with lower interest rates and better terms. “You might also be eligible for a higher loan principal amount,” says Griffin.
That said, “lenders define their approval criteria differently,” said 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 get an unsecured loan from LightStream. “People should do their research to see which lenders may be suitable for their financial situation.”
Some lenders realize that credit score doesn’t always correlate with payment history and might approve your personal loan based on a larger review of your finances, Keltner explains. “By applying subscription, we can give credit to the consumer who needs it and doesn’t have that 740 credit score, ”he says.
What are the easiest personal loans to get?
“For many online lenders, the only product they have are personal loans, so they can collect your information and provide you with an instant credit offer using a soft credit draw it doesn’t impact your score, “Keltner explains.” They’ll tell you what you’re eligible for, how much and at rates for different amounts and terms. Often times, you can complete this end-to-end process on the same day or the same session. “
Getting a personal loan can also be easier when you can pre-qualify, which checks your chances of getting approved before you apply. Prequalifying with multiple lenders can help you compare estimated rates and terms to find the loan that best suits your needs.
[Read: Best Debt Consolidation Loans.]
Can you get a personal loan with fair or bad credit?
Whether your credit is fair or bad, you can still get a personal loan.
“Some lenders have more flexible underwriting thresholds than others, so it may be worth exploring your options with multiple lenders,” says Brian Walsh, certified financial planner and senior director of financial planning at SoFi fintech. “You can do it yourself by taking advantage of an online marketplace. “
Markets like this “shop” for loans that match your needs and will accept your financial situation. “You enter basic information like amount, purpose, location, and credit score to see potential options from multiple lenders,” says Walsh.
Some lenders will work with borrowers with a credit score of 580 or 600. Here’s what you can expect from these lenders online and in the market:
– Before has personal loans for consumers with a range of credit scores, and those with scores of 600 or higher get the best rates.
– OppLoans offers loans without a credit check, but it charges very high interest rates.
– Peerform is a loan market and credit score requirements vary by lender.
– Reached works with a number of lenders who do not have minimum credit score requirements.
Get the credit score you need for a personal loan
Building and maintaining a strong credit history, which translates into a higher credit rating, will position you to access the best personal loans. Your credit card balances are important to lenders because, according to Griffin, “if you maximize your credit, you will have less ability to pay off a personal loan.”
Here’s how you can improve your FICO score to obtain a personal loan:
– Pay your bills on time. If you are having trouble paying your bills, contact your creditors before you are late to ask them relief programs who can keep your accounts up to date.
– Manage credit card balances. Try not to use more than 30% of your available credit, and less is better for your credit score.
– Check credit reports regularly. Access free weekly credit reports online until April 2022 at AnnualCreditReport.com. If you notice suspicious activity on a credit card, report it to the creditor immediately.
– Build a credit history. Remember to try Experience boost, which is designed to increase your FICO score by giving you credit for cell phone and utility payments. This is a free service that will allow you to accumulate credit with bills that are usually not reported to the credit bureaus.
[Read: Best Home Equity Loans.]
Alternatives to personal loans
A personal loan may not be the most affordable or convenient option for you. In that case, you might want to explore some of these alternatives:
Credit card. A 0% introductory annual percentage rate offer may allow you to pay off your balance during the interest-free period. But, says Keltner, “Make sure you’re on top of your game and pay it off.”
Home equity loan or home equity line of credit. If you need the cash quickly, one of these loans is probably not the best choice. A home equity line of credit, or HELOC, can take up to 60 days because it usually involves an appraisal of the home, Keltner explains.
401 (k) loan. You can borrow from yourself at a low rate of interest, but these funds will lack yield. Plus, you can contribute less to your fund while you have the loan.
Make sure you do your research and choose based on what makes the most sense for your finances.
Griffin adds, “Just as there are different tools for different jobs, so too is 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. With today’s low interest rate. rate, now may be a good time to take advantage of the conditions. “