What Credit Score Is Needed for a Personal Loan?
The smaller the amount of money you need, the lower your credit score can be to qualify for a loan. For example, many lenders provide small personal loans even to applicants with Poor credit ratings. If you need a large amount of money, such as $10,000 or more, lenders will be more picky about your credit score and require it to be at least Fair. Therefore, before applying for a loan, evaluate your credit rating according to the standard categories:
- Poor: from 300 to 579
- Fair: from 580 to 669
- Good: from 670 to 739
- Very Good: from 740 to 799
- Exceptional: from 800 to 850
If your score falls into the Good category or higher, your chances of getting a loan are very high. If the score is Fair, it will also be sufficient for the lender in many cases. However, if the credit score is classified as Poor, you should look for those lenders who provide loans for bad credit.
Loan Eligibility Criteria
Each lender sets their criteria for approving personal loans. In doing so, they rely on their experience of working with different borrowers and general trends in the industry. Therefore, by knowing the statistics for the state or country, you can more accurately predict whether your credit score is sufficient to qualify for a loan.
In 2024, the average credit score in the United States is 717. This means that if your score is around this level, you will get a personal loan at a low interest rate. And the loan size for such a score will be large. However, to get a loan with the lowest interest rate, you must have a credit score of Very Good or higher.
The most unpredictable category with respect to the lender’s decision is Fair. For an applicant with such a rating, the lender can approve the loan or refuse it. Other factors will influence the decision, such as the amount of income, a stable place of work, payments on other loans, etc. In any case, a person with such a rating will not be able to qualify for large loans.
The strictest borrowing limits exist for applicants with a poor credit rating. The lender wants to make sure that such a borrower will be able to repay the debt. If the debt repayment experience is successful, the lender will subsequently increase the loan amount for such a client and reduce the interest rate, which is also high for a bad credit score.
Why Pay Attention to the Lender’s Criteria
Before you apply for a loan, find out what criteria the lender offers for granting a loan. If your credit score doesn’t meet its requirements, it’s best to look for another lender rather than try to persuade this one. If they check your credit score with the credit bureau, this will lower your score, which means your chances will be lower when negotiating with the next lender.