What is The Minimum Credit Score Required For a Personal Loan?
When you experience an emergency in life, such as an unexpected medical bill or job loss, getting a personal loan can ease a lot of stress you are likely going through. But if you are in need of money quickly, you might be curious about what sort of credit score you need to qualify for a personal loan.
Can you get a personal loan to pay off your debt? Find out here.
While many will be able to get a loan easily, others might have some difficulty due to their low credit score. That is why it’s important to have an idea of what sort of credit scores lenders are looking for before you apply for a loan. In this article, we will take a look at that idea, as well as why credit scores matter when getting a loan.
What is a Credit Score?
A credit score is a three-digit number that is based on the contents of your credit report. The better the credit report, the higher the credit score. Your credit report is basically a personal profile of the credit history you have, as well as the credit situation you currently find yourself in. Some details listed within include how good you have been with payments, any current and past loans of yours, and more.
What Qualifies As a Good Credit Score?
So what would generally qualify as a good credit score? Well, in the United States, credit scores range from 300, all the way up to 850. A bad credit score is often seen as anything below 600, and if your score is over 700, it is considered good. Despite that, you don’t need a credit score over 700 to get a loan, but we will discuss that further later on.
To learn how your credit score is calculated, look at this.
Why Lenders Check Credit Before Approving
Why are lenders concerned with your credit report and credit score? Because your credit history is a good indication of how reliable you are when it comes to staying current with your payments. If your history shows a ton of missed payments, a lender is unlikely to want to give you a loan.
If you have a good history of successful and timely payments, you are seen as less risky and lenders will be more willing to work with you. Not only that, but they will be more willing to give you a larger loan at a lower interest rate.
How do I Find Out My Credit Health?
As you can see, getting loans can be very different for you depending on the credit score you have and the health of your credit report. But how are you supposed to know how good your credit score or report is? Well, you are able to check your credit report simply by reaching out to the credit bureaus and requesting a copy.
Read this if you’re having trouble understanding your credit report.
You are entitled to one free copy every year, which you can request from our country’s 3 main credit reporting agencies (Equifax, TransUnion, Experian). This way, you’ll be able to see exactly what a lender will see when you apply for credit. As for your credit score, there are a number of tools online (or possibly through your bank) that will allow you to check your score in seconds.
What is the Credit Score Needed For a Loan?
How do you know if your credit score is good enough to get the loan you need? Every lender has their own set regulations for approving loans. Therefore, before you go applying for a loan, be sure to ask your lender whether or not they check credit, and if so, what sort of credit score they require for approval.
However, most of the time, a score of around 580-600 is the minimum range that conventional lenders will require. If you have a score that is lower than that, you might want to work on improving your credit score by responsibly using credit before you apply for a loan.
For some methods of improving your credit score today, check this out.
Nonetheless, if your score is below that level and you need some fast cash, don’t worry; there are still options out there for you.
Bad Credit Personal Loans
One option is to find a bad credit personal loan. While banks or other traditional financial institutions might not offer these bad credit loans, there are likely a few different local lenders in your area that will. These loans will likely have slightly higher interest rates, but they are still a good option for anyone in need of quick cash.
Want to know if you can buy a house with bad credit? Try reading this.
No Credit Check Loans
In addition to loans with bad credit, there are also loans out there that can be secured without a credit check. These loans will be available for most people but might come with a larger interest rate, as well as more terms and conditions. They also might require you to offer up some sort of asset as collateral. That being said, a secured loan might be a better option, as it can be cheaper than an unsecured one. It can also provide great relief for those who need a loan but have questionable credit.
Look here to discover some ways of getting a loan when you have bad credit.
Every lender has their own rules about the minimum credit score that they require for personal loan approval, but generally, a score of around 600 is sufficient. Hopefully, this article has helped you learn a little more about credit scores, credit reports, and how both these elements help lenders decide which potential clients to work with.