What credit score do you need for a personal loan?

Applying for a loan can be a little like going on a first date. You want to make a good impression. The anxiety of knowing you're being judged brings out all your insecurities. You wonder how well you'll measure up to expectations.

When it comes to getting a personal loan, that kind of nervousness can make you worry that you'll get turned down. That's why it's good to know the credit score needed for a personal loan, and what else it takes to qualify.

If you need a personal loan, don't give up before you even try. In some situations, requirements such as credit score for personal loans may be easier than you think. It helps to know what lenders are looking for and how you can improve your chances of getting approved.

What credit score do you need for a personal loan?

To get a personal loan, most lenders look for a credit score between about 580 and 660 or higher, depending on the lender and loan type. Higher scores usually qualify for lower interest rates, but lenders also review your income, debts, and overall financial history.

The range of 580 to 660 would generally be considered a "fair" credit score. We’ll show you how various credit scores stack up and what they mean. 

Credit scores are just one factor lenders look at when evaluating loan applications. Some lenders are more accepting of a less-than-perfect credit history. 

Understanding credit score ranges

The following table should give you a feel for how different credit score ranges are generally looked at by lenders:

If you're in one of the top credit tiers, you should have a pretty easy time getting a personal loan. It's still a good idea to shop around and present the strongest possible qualifications you can. That should help you get the best deal possible on loan terms.

If you're in one of the lower tiers, you could still get a personal loan. Even in the bottom credit tier, it's still possible to qualify. It just means your options will be more limited. That makes it vital that you put your best foot forward.

How lenders decide if you qualify for a personal loan (beyond credit score)

The credit score needed for a personal loan varies by lender. So do other approval factors, which are especially important for lower credit scores.

Here are some of the other things lenders are likely to consider:

• Debt-to-income (DTI) ratio. Your DTI ratio is calculated by dividing your monthly debt payments (including housing) by your gross monthly income. This measures how much of your income goes to debt payments, so the lower the better. Some lenders cite the mid-30% range or lower as an acceptable DTI ratio. Still, there are no absolutes because this is just one factor. If your other qualifications are strong, a higher DTI ratio might be okay. With a low credit score, you may need a much lower DTI.

• Strong payment history. This is a factor in calculating your credit score, but also something lenders will focus on specifically. They'll want a look at how well you've done at making your payments on time in the past.

• Consistent income. The amount of your income can influence your loan amount, but for approval, consistent income is also important. For example, a salary from steady employment is generally more consistent than commissions or freelance work. Spending several years at one job could also be seen as more reliable income than hopping from one employer to another. 

• Credit utilization. This is the percentage of your available credit limits that you currently use. Say the credit limits on your credit cards total $10,000. If your balances total $2,000, you'd be using 20% of your available credit. If you owe $9,000, your credit utilization would be 90%. This tells a lender whether your finances have some breathing room or you're close to being tapped out.

Go back to the idea of being on a first date. Usually no single factor makes it a success or a failure. A warm personality might make up for average looks. Passion for your work may make up for a slimmer salary.

Charm won’t open the door to a personal loan. But if you don't have a great credit score, other factors might make up for it.  

Can you get a personal loan with fair or bad credit?

Lenders look at a variety of factors. If you're wondering what credit score is needed for a personal loan, the answer is that it depends on your overall financial situation. 

There’s no specific absolute minimum credit score for a personal loan. Yes, lenders prefer borrowers in the good or excellent credit tiers. Still, under the right circumstances, you could get a personal loan with poor credit—say, below a 600 credit score.

Here are some examples of how this may play out.

Personal loan for fair credit score borrowers (580-660 credit score)

In the 580 to 660 credit score range, you're in the middle. In this territory, any little thing you can do to improve your score could mean the difference between rejection or approval. Clearing up problems on your credit report or paying down a balance or two might tip the decision in your favor. 

In this range, a reasonable DTI ratio is also critical. The lower you can get that ratio, the better your application will likely look to lenders.

Do some research on which lenders cater to fair credit score borrowers. Try prequalifying to learn where your chances are best. Prequalification is different from pre-approval. It doesn't involve a hard credit check, so it shouldn't hurt your score.

Even under the best circumstances, you probably won't get the absolute best interest rates in this credit score range. To minimize the cost, try getting by with a smaller loan for now. Then you could improve your credit score by paying off that loan on time and as agreed. That way, you could qualify for a more cost-effective loan later on. 

Personal loans for bad credit score borrowers (below 580 credit score)

At this level, you're considered to have poor credit. Few lenders will approve a personal loan for a below-580 credit score borrower, but they do exist.

Shopping around is a key if your credit score is in this range. Some lenders will be out of the running based on credit score alone. Those that remain are likely to require all other aspects of your financial situation to be strong. This means having a low DTI ratio and a stable income history. 

If you can't find a conventional personal loan with a credit score below 580, some other options to consider are:

• A secured loan, if you have something of value you can put up as collateral to back the loan.

• Use a co-signer with better credit who is willing to share responsibility for the loan. 

• Try a payday alternative loan (PAL). Some credit unions offer these small-dollar, short-term loans. PALs don't require a credit check, but you do have to be a member of the credit union. 

• Use a credit builder loan (CBL) to improve your credit score. This kind of loan won't help with your immediate need for cash, because funds aren’t released until you finish making payments. However, they could give you an opportunity to build the kind of payment history that will allow you to qualify for a loan in the future.

Realistic examples

Here are some examples of how to get a personal loan with fair or bad credit:

• Raise credit score. Jerry had a credit score of 660 when he started thinking about getting a personal loan. Before applying, he checked his credit report and found some outdated negative information. He communicated with the credit bureaus to get his report updated. He also decided to wait six months to pay down some existing debt and build a positive payment history. These efforts raised his credit score from fair to good. That allowed him to qualify for a personal loan easily and at more favorable terms.

• Stable income and low DTI. Donna's credit score was 590, which was considered the low end of fair. She also had very little current debt and had been at the same job for three years. With a DTI ratio below 20% and a stable income history, she was able to find a lender that would give her a loan despite her low credit score.

• Borrow with a co-signer. Mickey's credit score was very poor, at 550. He had worked on his budget so he wouldn't have to keep borrowing, but he wanted to consolidate some existing debt. He got a close friend with a good credit history to co-sign a loan. He was able to show the friend how consolidating into lower-interest debt would allow him to keep up with his payments. On the strength of his co-signer's strong credit score, Mickey was able to get the loan. By making his payments on time, he gradually built up his own credit. 

How to improve your chances of getting approved for a personal loan

Here are some things you could do to improve your chances of getting approved for a personal loan:

• Clear up any mistakes or errors on your credit report that may be dragging down your scores

• Pay down debt to lower your DTI ratio

• Delay applying for a loan while you make on-time payments on existing credit to improve your credit score

• Shop around for a borrower who offers personal loans for bad credit score borrowers

• Reduce the size of loan you're applying for so it's less risky for the lender

• Try a payday alternative loan or a credit builder loan as an interim step to build credit

• Offer personal property as collateral on a secured loan

• Find a co-signer with good credit

Next steps: what to do now

Now you know the possibilities for getting a personal loan even if you have poor credit, here's what to do next:

• Check your credit report for mistakes or outdated information. These can be fixed, but it may take time so do this when you first start thinking about getting a loan.

• Check your credit score. If you've had changes made to your credit report, wait a month or so for them to be reflected in your credit score.

• Calculate your DTI ratio. If it's at or above the mid-30% range, consider steps to bring it down. These could include paying off or restructuring current debt.

• Research loan options. Knowing your credit score and DTI ratio should give you a feel for how strong your qualifications are. Find a lender and loan type well suited to those qualifications.

• Choose a lender and get a quote. Compare rates and fees and find out which lender has the best terms for your situation.

• Budget before you borrow. Qualifying for a loan is just the start. The most important thing is figuring out how you'll afford the payments before you commit.

A personal loan could help you pursue your financial goals. Approaching a loan the right way can help you succeed in meeting those goals.