If you think your credit score will affect your chances of securing a personal loan, you’re right. Your credit score is one of the main factors that lenders use to determine your creditworthiness, and you’ll have more loan options with a higher score.
That said, don’t worry if you don’t have an excellent credit score right now—you can always improve your score before applying for a loan, or explore alternatives to a traditional personal loan.
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Is there a minimum credit score required for a personal loan?
No, there isn’t a universal minimum credit score required to get a personal loan. However, lenders favor borrowers with credit scores that fall within the “good” range—aka at least a 670 credit score in FICO models or 661 score in VantageScore models.
If your score isn’t quite that high, you may still be able to get a loan. However, if your score is lower than 600, you’ll probably have a pretty tough time qualifying for anything.
The graphic below illustrates the credit score ranges in both models and how they’re classified. The farther you are to the right side of the credit score gauge, the easier it will be to get approved for a personal loan (or any other type of credit).
FICO Score Classifications
How easy is it to qualify for different types of personal loans?
What credit score you need for a personal loan also depends on the type of loan it is:
- Unsecured loans: Unsecured personal loans aren’t backed by collateral. They’re higher risk for lenders, so they often have higher credit score requirements.
- Secured loans: Secured personal loans are backed by some form of collateral—an asset that you’ll forfeit if you fail to pay back the loan, such as your car. For this reason, they’re easier to get than unsecured personal loans and often come with lower interest rates. 1
Do you need credit to get a loan?
No, you don’t necessarily need credit to get a loan. However, if you don’t have a credit history, lenders will have a more difficult time determining your creditworthiness, so you’ll have fewer loan options. You’ll also probably pay higher interest rates and fees.
How can you get a personal loan with bad credit or no credit?
If you’re trying to get a loan with a bad credit score or no credit score at all, try finding a lender that offers secured personal loans or considers factors other than your credit score. Some creditors may be willing to overlook your credit if the rest of your finances are healthy (i.e., if you have a stable income and a lot of money saved away).
Additionally, you can try applying with a cosigner, which is someone with good credit who will agree to pay back your loan if you default (stop paying it). Many lenders will relax their requirements if you have a cosigner, so you can ask around and see if you have any friends or family members who will cosign your personal loan.
If you go this way, make sure you really are prepared to pay the loan back in full and on time. If you don’t, you might badly strain your relationship with your cosigner.
Other requirements for personal loans
In addition to running a credit check on you, personal loan providers will also usually consider the following other factors when assessing your loan application:
- Credit history
- Employment status
- Debt-to-income ratio
All of these factors help lenders determine how capable you are of repaying your personal loan and how likely you are to abide by the terms of your loan agreement (e.g., by always paying in full and not making late payments).
As mentioned, if your credit isn’t very good, you can look for lenders that weight other factors more heavily than your credit score. Search the web for reviews of loan providers in your area or call local credit unions and ask about their requirements.
How to improve your credit score before applying for a personal loan
If your credit score isn’t ideal and you’re not in a particular hurry to take out a personal loan, consider spending a few months improving your credit score before you apply.
Use the following tips to start building your credit:
- Check for errors on your credit report and file a credit dispute if you find any
- Improve your payment history by bringing past-due accounts current
- Avoid making any late payments
- Keep your credit utilization ratio low by using less of your credit limit
- Ask someone with a good credit history to add you as an authorized user on their credit card
Taking the time to build up your credit won’t just make it easier to get a personal loan with great terms. It’ll also allow you to reap the other benefits of good credit, such as eligibility for credit cards with rewards, lower insurance premiums, and even a smoother apartment-hunting process (landlords often impose credit score requirements for renting an apartment).
Make sure to regularly check your credit reports with the three main credit bureaus (Experian, Equifax, and TransUnion) and your credit scores to track your improvement. You can request free copies of your credit report at AnnualCreditReport.com.
Alternatives to personal loans
If your credit score is too low for an unsecured personal loan and you don’t have any collateral you can use for a secured personal loan, then you can still get some quick cash with these personal loan alternatives:
- Credit card cash advance: This is a convenient way to get money on the go if you have a credit card. All you need to do is use your card at an ATM and enter a special PIN. However, interest rates on credit card cash advances are generally quite high, so this will end up costing you in the long run.
- Peer-to-peer loans: Peer-to-peer (P2P) lending allows you to borrow money from other people rather than going through a traditional bank. While P2P loans don’t necessarily require good credit, you may end up paying higher interest rates and fees than you would with a conventional loan. 2
Don’t hesitate to seek out help if you’re having trouble managing your finances. You can receive credit counseling from a nonprofit credit counseling organization, ask your creditors about hardship programs, or explore other solutions for getting out of debt.