If you’re gearing up for a major expense or want to consolidate high-interest debt, you might consider a personal loan. But you often need a minimum credit score to qualify for a personal loan.
Most lenders use your credit score to determine your interest rate and loan terms. Other factors, like your income and current debt, contribute to your ability to qualify for a loan, but the better your credit score, the better loan terms you’ll usually receive.
What is a credit score?
Your credit score is a number between 300 and 850 that represents your credit history. Personal loan lenders use your credit score to get an idea of how likely you are to repay a loan.
There are several different scoring models that assign credit scores based on the information in your credit report. One of the most commonly-used credit scoring models is the FICO score, developed by the Fair Isaac Corporation.
Other companies have different credit scoring models, but most lenders use FICO scores when assessing your loan and credit card applications.
FICO scores are divided into the following credit score ranges:
- Below 580: Poor
- 580 to 669: Fair
- 670 to 739: Good
- 740 to 799: Very Good
- 800 or higher: Exceptional
Tip: A good, very good, or excellent credit score will make it more likely you qualify for a larger loan and a lower interest rate.
FICO scores and other credit scoring models take several different factors into account when determining your credit score, including:
- Payment history: Whether or not you’ve made previous payments on time. Doing so positively impacts your credit score.
- Credit utilization: How much of your available credit you use. A lower credit utilization can help improve your credit.
- Length of credit history: How long your credit accounts have been active. A longer credit history generally improves your credit.
- Credit mix: If you carry a variety of debt — like credit cards, installment loans, and mortgages — this can boost your credit score.
- New credit inquiries: The number of accounts you’ve applied for recently. Too many credit inquiries in a short period of time can lower your credit score.
How credit scores affect personal loan interest rates
The higher your credit score, the more likely you are to get a better interest rate. The opposite also applies - the lower your score, the higher your interest rate tends to be. Credible data on three-year and five-year loans help illustrate the relationship between credit scores and interest rates.
Average rates are based on prequalified Credible users who selected a personal loan in March 2025. Source: Credible.com
Minimum credit score for a personal loan
Your credit score — along with your income and debt-to-income ratio (DTI) — impacts your ability to qualify for a personal loan. Your credit score also affects the loan amount and interest rates you’re offered.
Lenders, understandably, want to avoid taking on too much risk. Looking at your credit score when assessing your loan application allows them to get a sense of how likely you are to repay a loan.
The higher your credit score, the more likely you are — from a lender’s perspective — to pay back your loans. That’s because your credit score demonstrates your history of repaying debt. Paying your loans and credit cards off on time helps boost your credit score. On the other hand, falling behind on payments and overextending yourself leads to a lower credit score.
The minimum credit score required for a personal loan depends on the lender. Some are more lenient than others when it comes to lending to borrowers with bad credit. Some lenders require fair credit — a score of at least 580 — to qualify for a loan. But many require a good credit score for a personal loan — generally, a score in the high 600s or above. Fewer lenders offer personal loans for bad-credit borrowers, or those with a credit score below 580.
Credit score range and personal loans
While different lenders have different eligibility requirements for personal loans, here’s what you might expect when applying for a personal loan based on your credit score:
Tips to improve your credit score
If you don't have the credit score needed for a personal loan - or your score is preventing you from getting a low interest rate - you can take steps to improve your credit score. While you usually won't see your credit score jump overnight, the following strategies can help you raise it over time:
- Pay off your debt on time and in full: Payment history is the biggest factor that affects your credit score. Improve your score by making full payments on time, every time.
- Don't max out your credit cards: Using all or the majority of your credit limit signals that you may be overextended. Lowering your credit utilization can help raise your credit score.
- Keep old credit cards open: Avoid closing old credit cards, even if they're paid off. The length of your credit history has a big impact on your credit score, so keeping those long-standing accounts open makes a difference.
- Look for errors on your credit report: Hopefully, your credit report is error-free, but mistakes do happen. Check it for errors at least once per year and before applying for a loan. If you find a mistake, follow the Consumer Financial Protection Bureau's steps for disputing it.
Can you quickly boost your credit score?
You could see your score impacted — positively or negatively - within weeks of making certain changes to your credit profile, such as paying off debt or running up your credit card balances. This is because the typical timeframe for lenders to send updated information to credit bureaus is every 30 to 45 days. The three major credit bureaus — Equifax, TransUnion, and Experian — generally update credit reports and credit scores on a similar schedule, monthly or every 30-45 days.
But the category that has the most influence on your FICO score is payment history, which makes up 35% of your overall score. The key word there is "history" — it's a comprehensive record of payments to lenders and creditors during your time as a credit user. So it can take months to see a positive impact from a pattern of timely payments.
So, while you could see a quick boost from paying off debt, lasting gains will likely take months. It's best to look at boosting your credit score as more of a marathon than a sprint.
How to get a personal loan with bad credit
If you aren't able to wait for your credit score to improve, you may need to get a personal loan for bad credit. While it's not as easy to get a loan with bad credit, it's not impossible. In fact, you have several options:
- Secured loans: Secured loans require you to put up collateral - like your house, car, or another valuable asset - in order to qualify. Because they're less risky for the lender, they tend to have lower interest rates and are usually easier to qualify for.
- Get a cosigner on a loan: If you're struggling to qualify for a personal loan, you may be able to apply for a loan with a cosigner. A cosigner with good credit can help you qualify for a loan with low interest rates, but their credit, as well as your own, will be on the line if you default.
- Credit-builder loans: Credit-builder loans work "backward." Instead of receiving your funds upfront, you make monthly payments - which can help you build your credit - before you receive your funds. Look for credit-builder loans at credit unions or smaller community banks.
- Payday alternative loans (PALs): PALs are small loans available to federal credit union members. These short-term loans have repayment periods of up to 6 months and have much lower interest rates than traditional payday loans.
Check Out: Types of Bad Credit Loans
FAQ
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