Don’t let fair credit stop you from getting the funding you need. Get the facts and figures to make an informed decision.
By taking into account what kind of loan your credit score can get you, you’re setting yourself up for success. Interest rates, terms, requirements and whether you can even get approved all come down to your creditworthiness. By considering it, you’re setting up realistic goals for repayments. This guide will take you through what to expect when you’re looking for a fair credit loan.
What exactly is a fair credit score?
A fair credit score generally sits between 620 and 679.
Credit scores aren’t as clear-cut as you might think. The three main credit bureaus — Equifax, Experian and TransUnion — each use their own scoring systems. There’s also FICO (Fair Isaac Corporation), which also uses a different system and is considered the industry standard by many lenders.
Even though these bureaus collect the same information to determine your credit score, there’s enough variance in their algorithms to result in different scores among them.
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How does my credit score affect my application?
Quite simply, the better your score, the better the loan. While a credit score is not the only factor, it’s widely used to determine rates, maximum limits on borrowing and if you can even get a loan in the first place.
Though the scores may differ among agencies, they all try to determine how well you’re meeting your financial obligations. The better you are at meeting your financial commitments, the less risk you’ll pose to a lender. On the other hand, if you’ve struggled to pay your bills on time or have missed payments, your offered rates will most likely be subprime.
What loans are available to people with fair credit?
Repairing your credit score can take time, but you have lending options if your credit is sitting at fair right now.
- Auto title loans. An auto title loan is a secured loan that uses your car title as collateral. Auto title loans are usually considered short term loans because they’re meant to be repaid quickly.
- Installment loans. Installment loans are repaid in periodic (usually monthly) payments and aren’t tied to collateral.
- Short term loans. Short term loans, also referred to as payday loans, can be paid back in as little as two weeks or on your next payday. They’re usually given in small dollar amounts of up to $1,000 but can be as much as $2,250 with a few lenders.
How do I compare my loan options if I have fair credit?
A fair credit score limits your options slightly. Not all lenders will be willing to fund you, depending on other criteria, and others won’t give you the best loan terms. Here’s what you should look for when comparing lenders:
- Interest rate. One of the biggest factors to look at is the APR that’s offered. Your credit score, the amount you want to borrow, your ability to repay and the loan term can all impact this number.
- Maximum loan amount. Borrowing more than you need can lead to bigger trouble in the long run. Consider exactly how much you need to borrow, and why that amount is necessary.
- Loan term. While a shorter term can mean you’ll be making larger payments, you’ll end up paying less in interest.
- Turnaround time. Some lenders are able to get you the funds you need as soon as the day after you apply. These lenders may not always have the best rates though, so consider whether you really need to prioritize speed over savings.
- Requirements. Different lenders may require you to meet different criteria. Credit score, age, income and residence are all factors that may determine your eligibility.
I want better rates and terms on a loan. How can I improve my credit?
Five main factors determine your credit score: payment history, credit utilization, how long you’ve held credit, type of credit used and number of credit inquiries. To repair your credit, keep in mind the factors below.
- Pay off open balances. Credit utilization includes your debt compared to your total credit. If you aren’t using as much credit as you have available, your score can improve by paying down balances. Simply moving the balances will not affect your utilization rate.
- Keep open balances low. Experts advise to keep your balance below 30% of your approved credit limit.
- Don’t close an unused account if you don’t have to. Closing an account can negatively affect your credit utilization rate.
- Avoid opening new accounts. Once your score improves, you can take advantage of better interest rates. So wait to open new accounts if you can.
Compare loan options for different credit score ranges
| Loans for good credit (680+) | Loans for excellent credit (720+) |
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Bottom line
Your credit score can affect your ability to get a loan. With interest rates, terms and eligibility all at least partially dependent on your credit score. It’s important to know not only what your score is, but also how your actions influence it.
When you’re looking to take out a loan, make sure it’s both what you need and something that you can financially handle. If you can’t make timely payments, you could damage your creditworthiness and hurt future attempts at financing. Shop around, research, ask advice from an expert or even a trusted friend — and sleep on any big decisions.
I have a credit score of less than 680 and need a loan of $20,000.00 to pay off some credit cards. But I need a monthly payment of less than $400.00. Is there an institution through which I might be able to secure that type of loan?
Hi David,
I’d be glad to help you. Your monthly payment will depend on a few things, some being your creditworthiness, loan term length and whether you choose a fixed or variable rate. If you want to have a payment of $400 or less, you should shop around to see what lenders are offering low fixed rates – a fixed rate will not change once you are locked in. Start here to find a loan that could work for you.
Good luck loan hunting!
Kyle