What are the requirements for a credit score on a personal loan?
Credit Scores & Personal Loans: Our Guide
A personal loan can help you get the financial help you need when you need it most. Personal loans cover any number of expenses or obligations. If you need to consolidate debt, pay for large purchases, or cover recurring costs, a personal loan can give you the support you've been looking for.
So how do you qualify for a personal loan? Lenders weigh a lot of factors when deciding who to extend a loan to and how much money to give. But your credit score is one of the most important factors. Learn more about what goes into a credit score, what lenders look for in a credit score, and they different types of credit pulls are.
Do you already know that you want to apply for a personal loan? Get more information on our current loan products and get started today.
How does your credit score affect your personal loan application?
Credit scores are a reflection of your credit history, distilling years of credit card balances, rent payments and utility bills down to a three-digit number. Credit scores can range from 300 to 850, but most people will probably have a score between 580 and 800.
Lenders typically base personal loan application decisions on prevailing credit score ranges. Here’s how these credit score charts usually break down:
- Less than 580 = Poor
- 580-669 = Fair
- 670-739 = Good
- 740-799 = Very Good
- 800-850 = Exceptional
Do you already have a strong credit score? Get notified when personal loans from Guaranteed Rate are available.
Are you looking to work on improving your credit score for a personal loan? Give our detailed credit FAQ a look to get tips on how to get a higher credit score.
What goes into your credit score?
Credit bureaus look at a lot of factors when crunching the numbers and determining your credit score:
- Payment history: Do you consistently keep up with your debt payments?
- Credit use: Are you close to maxing out your available credit or do you give yourself plenty of breathing room?
- Credit file age: How long have you been managing your credit account balances?
- Account type: Do you carry multiple types of debt — credit cards, auto loans, personal loans — or just one or two?
- Credit application history: Have you attempted to open up new lines of credit recently or several in a short span of time?
At its most basic level, a credit score helps financial institutions determine how much risk they take on by loaning money to someone.
What credit score do you need for a personal loan?
While having a credit score that's higher than average should give you more options, credit score requirements largely depend on the lender.
Many lenders may have their own set of criteria you’ll need to meet in order to secure a personal loan. Lenders may also review each loan application on a case-by-case basis. They often look beyond your credit score number to weigh other aspects of your risk profile. Certain loan options may be better for people in different financial situations.
Higher is generally viewed as more likely to get approved, but there are several factors that a lender looks at. Having a high credit score doesn't guarantee approval, and having a lower than average credit score doesn't make rejection a certainty.
What other personal loan requirements do you need to meet?
As we said, your credit score is just one of several personal loan requirements lenders weigh when considering a loan application. Other factors include:
- Cash flow: It gives lenders a better sense of how much financial flexibility you have and your ability to repay your personal loan.
- Debt-to-income (DTI) ratio: DTI ratio compares how much money you have coming in vs. what you owe each month. It lets financial institutions know if you’re living within your means.
- Credit history: Lenders prefer borrowers who have a strong track record of managing and repaying debt. In the eyes of lenders, carrying credit cards for several years is viewed as a positive.
- Credit mix: If you’re like most people, you’re carrying a lot of different types of debt: credit cards, auto loans, student loans, mortgage, etc. Staying on top of a variety of debt shows lenders you have the financial discipline to handle a personal loan.
How does applying for a personal loan impact your credit score?
Not all credit checks are the same. There are two types of credit inquiries: a soft pull and a hard pull.
- Soft pull: Very surface-level review of your credit — similar to checking your credit score through your bank or credit company. Lenders run a soft pull when they want to take a broad view of your credit. More importantly, soft pulls don’t impact your credit score.
- Hard pull: In-depth review of your credit history involving a full credit report. Lenders run hard pulls when you officially apply for a loan, whether that’s a mortgage, auto loan or personal loan. A hard pull can affect your credit score.
Where can I get a personal loan near me?
Are you searching for a personal loan to give you the financial support you need when you need it most? Get notified when personal loans from Guaranteed Rate are available and get the help you’ve been looking for.
* You must be 18 years of age or older. To qualify, a borrower must be a US citizen, a permanent resident, or a non-permanent resident in the US on a valid, long-term visa. All loan applications are subject to credit review and approval as well as income and employment verification. You must meet our minimum requirements established for this offer including, but not limited to, credit history, debt-to-income ratio, and application information. Your actual rate depends on your requested loan amount, loan term, creditworthiness, and a variety of other factors. Loan amounts range from $4,000 - $50,000. Rates and loan amount may differ due to state specific requirements and may impact your ability to qualify for a loan. Limitations: CA (rate and amount), FL, ME, NC, TX and VT (rate), IL, MA, RI (amount). The lowest rate advertised is reserved for the most creditworthy borrowers. Advertised rates and terms are current as of 8/10/2022 and are subject to change without notice.
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