Your credit score is one of the most important factors in a personal loan application. Lenders often won’t consider you if you don’t meet their minimum credit requirement. However, it’s not the only feature they look at.
What credit score do I need to get a personal loan?
Typically, you need a credit score of at least 650 to get a personal loan. However, you usually have more options if you have a credit score of 700 or higher.
Minimum credit score to qualify with top online providers
Generally, lenders that fund loans directly require good credit — especially banks, though credit unions and online lenders might be more relaxed. Peer-to-peer lenders, which connect borrowers with investor funding, also typically require higher credit scores. If your credit score is below 650, you might have an easier time finding lenders if you use a connection service that matches you with lenders whose criteria you fit.
What credit score do I need to get a competitive deal?
Generally, you need to have excellent credit to get the lowest rates and largest loan amounts that a lender offers. However, you can often get a favorable deal even if your credit score is considered good.
While lenders might have their own criteria for what qualifies as good or excellent credit, it’s usually around this range:
You can use one of the following services or methods to check your credit score. Typically, the score you receive is based on a soft credit inquiry, which doesn’t affect your credit rating but may not be as accurate as a hard credit pull. When lenders evaluate a loan application, they’ll do a hard pull on your credit, which will temporarily decrease your credit score.
Online services. Sites like Credit Verify (powered by TransUnion) allow anyone to check their credit score by filling out a quick online form with basic personal information like your name, birth date and address.
Budgeting apps. Many apps like Mint regularly check and update your credit score once you sign up.
Credit card or bank apps. If you have an app for your bank or credit card, you can often sign up to check your credit score and get alerts when it changes.
Account statements. Your credit score might appear on some statements for loans, checking accounts or other financial products.
Credit bureaus. You can also go directly to the source and check your credit score with the 2 major credit bureaus used in Canada: TransUnion and Equifax.
How can I improve my credit rating?
There are several steps you can take to improve your credit score before you apply for a personal loan:
Check your credit report. You’re entitled to 2 free copies of your credit report each year — one from each bureau. Request a copy and make sure it’s accurate. Reach out to your creditors if you find any mistakes on your credit report.
Pay down your balances. Got a lot of credit card debt? Loans? Paying off some of your balances lowers your credit utilization ratio and can improve your credit score.
Take out a credit-builder loan. Some local banks, credit unions and other financial institutions offer inexpensive small-dollar loans designed to help you improve your credit and establish a rainy day fund.
Can I get a personal loan with no credit score?
You can, though your options are much more limited. You might be able to qualify if you apply for the loan with a creditworthy cosigner. Or consider borrowing from friends and family.
Lenders for short-term loans like payday and installment loans often don’t take your credit score into account when you apply, though they tend to be much more expensive and come with several risks.
When determining your eligibility, lenders also take a look at your:
Income. Many lenders have minimum income requirements. Generally, the larger the loan you’re applying for, the larger the income you’ll need to qualify.
Employment. Personal loan providers often require borrowers to have a full-time job. You might have trouble finding a loan if you’re self-employed or getting financing when you’re unemployed, though there are options.
Credit history. In addition to your credit score, many lenders look at the length of your credit history. If it’s still relatively new — say, less than 3 years old — you might have trouble qualifying.
Debt-to-income (DTI) ratio. Your DTI ratio compares your monthly bills to your monthly income and gives lenders an idea of how much money you can afford to repay each month.
Compare loan options for different credit score ranges
Bottom line
You can get a personal loan with almost any credit score — or even no credit score. But you have more options if you have good to excellent credit. If you aren’t in a rush, consider taking the time to improve your credit rating so you can get an even more favorable deal.
It could be. In fact, consolidating your debt with a personal loan could improve your credit score if you need help managing your repayments. It could also give you more competitive rates and terms, especially if you have credit card debt.
The best reason is the truth. If a lender finds out you’re lying on your application, you’ll likely be denied. Some providers might restrict how you can use your funds. For example, you may not be allowed to take out a personal loan to pay for school or use personal financing to fund your business. In those cases, look for a lender that has fewer restrictions on how you use your personal loan.
Yes. When you apply for a personal loan, it temporarily hurts your credit score when a lender runs a hard credit check. However, it can improve your credit score if you make your repayments on time. If you’re late on repayments, it’ll damage your credit score.
Anna Serio is a trusted loans expert who's published more than 800 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like CNBC, Business Insider and The Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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