What Credit Score Do You Need for a Personal Loan?

When you're short on savings or want to consolidate debt, a personal loan can help. With the ability to access up to $50,000 or more, personal loans are versatile and widely available.

But you often need a certain credit score to qualify — especially if you want a loan with a low interest rate. While there's no single universal credit score requirement for personal loans, most lenders require a minimum FICO score, such as 640 or higher. In general, the better your credit score, the more options you'll have.

What is a credit score?

A credit score is a three-digit number, between 300 and 850 on the FICO scale, that represents your credit history — like whether your monthly payments are always on time or sometimes late, and if you've defaulted on any loans. Lenders use your credit score as a predictor of how likely you are to repay your debts. The better your credit history, the higher your credit score, which indicates to lenders that they can rely on you to pay them back.

The FICO scoring model, developed by the Fair Isaac Corporation, is a popular model used by most lenders. But in addition to the FICO scoring model, there's the less-used VantageScore.

Several factors affect your credit scores, each to a different extent. FICO calculates scores based on these primary factors:

• Payment history: This shows lenders your record of repaying debts and accounts for 35% of your score.
• Amounts owed: This metric considers the amount you owe across all your accounts. It includes the amount of revolving credit you use and accounts for 30% of your score.
• Length of credit history: This accounts for how long you've had credit accounts, going back to your oldest account. Length of credit history represents 15% of your score.
• Credit mix: This is the representation of different types of credit, such as credit cards, personal loans, and mortgages. Credit mix accounts for 10% of your score.
• New credit: This metric weighs how many new accounts you have and what type they are, as well as the number of new inquiries on your credit report — whether or not you end up opening the account. New credit makes up 10% of your score.

Credit scores are often split into ranges. FICO score ranges are as follows:

• Poor: Less than 580
• Fair: 580 to 669
• Good: 670 to 739
• Very good: 740 to 799
• Exceptional or excellent: 800 or higher

But it's a common misconception that you have a single credit score. Even with FICO, you could have different scores depending on the bureau you're looking at: Experian, Equifax, or TransUnion. This is because each bureau may have slightly different information about your credit file. Not all lenders and creditors report to all credit bureaus; they don't necessarily run hard credit checks with each bureau when you apply for credit either. As a result, your scores can, and often do, differ.

It's a good idea to check your credit scores regularly.

What is the minimum credit score needed for a personal loan?

Minimum credit score requirements for personal loans vary by lender, but many require good credit, which is a FICO score of 670 or higher. However, there are quite a few lenders — like Upstart, OneMain Financial, Reprise, Universal Credit, Best Egg, and Avant — that offer loans for fair credit or bad credit. But they typically charge higher interest rates and/or upfront fees to offset the risk of doing so.

You can see minimum credit score requirements with Credible partner lenders below.

Generally, the higher your credit score, the easier it is to qualify for a loan. That's because lenders have more confidence that you'll make on-time payments over several years and won't default on the loan.

Keep in mind that your credit score is just one of the factors that affect your chances of qualifying for a personal loan. Your income, debt-to-income ratio (DTI), and whether you apply with a cosigner also impact your approval odds.

Can I get a personal loan with bad credit?

You may be able to get a personal loan with bad credit by applying with a lender that works with bad-credit borrowers.

Alternatively, you can apply for a personal loan with a cosigner or with a joint applicant. While a cosigner doesn't have ownership over loan funds, their information goes on the loan application along with yours. If your cosigner has better credit than you, a lender may be more willing to give you a loan. A joint applicant, on the other hand, shares in the loan proceeds and is equally responsible for repayment from the start.

Both cosigners and co-borrowers take on risk. If you miss payments or default, it will affect both of your credit scores.

How your credit score impacts your personal loan application

Here's how FICO describes your ability to get a loan as a result of where your credit score falls:

• Poor credit (less than 580): Your score is well below average, and lenders see you as a risky borrower.
• Fair credit (580 to 669): Your score is below average, but many lenders may still offer you a personal loan.
• Good (670 to 739): Your score is at or slightly above average, and lenders consider your score to be good.
• Very good (740 to 799): Your score is above average, and lenders see you as a very dependable borrower.
• Exceptional (800 or higher): Your score is well above average, and lenders see you as an especially trustworthy borrower.

Not only does your credit score impact your ability to qualify for a loan, but it also affects your interest rate. Better credit makes it more likely you'll qualify for a lower interest rate, saving you money over your loan's term.

The following data from Credible shows how having a higher credit score can lower your interest rate:

As the numbers show, even the difference between good and excellent credit can lead to a meaningful difference in rates, which, Yonemoto points out, can “save you thousands of dollars in interest.”

With an excellent score, a low debt-to-income ratio, and sufficient income, “lenders see you as responsible with credit and reward you by offering their very best rate, which is generally the lowest advertised rate that you see appear in their marketing.”

How a personal loan can affect your credit score

When you apply for a personal loan, lenders typically perform a hard credit inquiry, which can affect your FICO score for up to 12 months. However, the impact is small — likely a drop of only a few points. However, some could drop by up to 10 points for up to one year.

However, new credit may have a positive impact on your credit score over time. If a personal loan improves your credit mix, your score can rise. Similarly, if you make consistent on-time payments, your positive payment history will help improve your score. Both those factors might take six months or more to positively impact your score.

However, if you use a personal loan to consolidate credit card debt, you could see a substantial gain in your credit score within one month. That's because by paying off your cards with an installment loan, you'll free up revolving credit. This will, in turn, increase your available credit — which can contribute up to 30% to your score. Since credit card companies typically report to the bureaus monthly, you could see relatively quick credit score gains.

Tips for building credit

If you don't need to borrow money right away, taking time to build your credit can help you qualify for better loan terms. “To increase their creditworthiness, applicants should be deliberate about improving their credit profile and trustworthiness,” says Derrick Creighton Jr., Financial Wellness Coach at BrightUp. “Several months before applying for credit, applicants should attempt to pay down debts, remove inaccuracies on their credit report, and limit credit usage.”

Here's a breakdown of how to do just that:

• Make every payment on time: Payment history is the largest factor affecting your credit score, so missed payments can be detrimental. Keep all payment due dates in your calendar, or better yet, sign up for automatic payments. Just don't rely on autopay and forget about it — if it fails to send on time, you're still on the hook for the late payment.
• Limit your credit utilization: Your credit utilization is the percentage of available credit you use. Lenders don't like to see you maxing out your credit accounts, so keep utilization low when possible — ideally less than 30%. This may mean putting fewer purchases on your credit cards or requesting a credit line increase.
• Keep old accounts open: Closing out an old credit card you no longer use may sound like a good idea, but think twice. The older your credit “age,” the better it is for your credit score. Keeping old accounts open — even if you don't use them — can help your score.
• Check your credit report regularly: Your credit report is a collection of your credit activity, accounts, and payment history. Creditors submit information to credit reporting companies, but errors happen. Check your credit report for free at AnnualCreditReport.com and review it for any mistakes. If you find any, dispute them with the credit reporting agencies. Your credit report doesn't contain your score, but you can check your credit score for free with Credible's credit-monitoring tool.

Other personal loan requirements

Personal loan requirements vary by lender. But most lenders tend to consider the same basic factors in addition to your credit score:

• Income: Lenders want to be sure you have the funds to repay your loan, so they may have minimum income requirements. These requirements vary by lender: For example, Discover requires an annual income of $25,000, while Upstart requires $12,000. Generally, the higher your income, the more money you can borrow.
• Debt-to-income ratio (DTI): Your DTI is the percentage of your monthly income that goes toward repaying your debt. The higher your DTI, the less room you have in your budget, and the less likely you are to qualify for a loan. Lenders typically like to see a DTI of no more than 36%.
• Collateral: Some lenders, like Best Egg, allow you to secure your personal loan with an asset. If you can't repay your loan, the lender can seize your collateral. While this can be risky as a borrower, it can also help you get approved for a loan.
• Other general requirements: Most lenders have additional requirements, such as age and residency requirements. You often have to be at least 18 years old, be a U.S. citizen or permanent resident, submit proof of address, and provide your Social Security or Taxpayer Identification Number.

Alternatives to personal loans

Getting a personal loan is a big financial commitment and isn't always the most affordable, convenient, or practical way to borrow. If you want to explore other options, consider these personal loan alternatives.

• Credit cards: Credit cards typically have higher interest rates than personal loans, and are best used for purchases you can pay off within one month (before interest charges kick in). But if you can get a card with a 0% APR introductory APR and pay off your balance before the rate increases, you could borrow interest-free for 15 to 24 months.
• Home equity loans or HELOCs: Home equity products let you borrow against the equity you have in your home and typically have lower interest rates compared to personal loans. But the approval period can take weeks or more, closing costs may be higher, and you'll need to put your home up as collateral for the loan.
• Payday alternative loans (PALs): For smaller loan amounts, consider a PAL from a credit union. These short-term loans allow credit union members to borrow as much as $2,000 and have an interest rate cap of 28%.
• Cash advance apps: Cash advance apps, or loan apps, let you borrow money against your future paycheck. They may charge instant pay or subscription fees that can lead to ultra-high APRs.
• Buy Now, Pay Later (BNPL): BNPL services allow you to make a purchase in several payments, often spaced two weeks or one month apart. Short-term BNPL plans typically don't come with interest but may charge late fees. Longer-term plans may also be interest-free, depending on the store you're purchasing from and your credit.
• Financial assistance: If you're struggling to keep up with essential expenses, don't overlook financial assistance programs that can help you with food, housing, medical care, utility bills, and more. Visit 211.org to learn about resources available in your area.