When it comes to applying for a personal loan, most banks require a minimum credit score of 610 to 640. This is according to an anonymized dataset of NerdWallet users who pre-qualified for personal loans. Although having a high credit score doesn't guarantee you'll get approved or get a low interest rate, it's still important to know what the minimum requirements are. Credit scores typically range from 300 to 850, with 300 being considered bad credit and 850 being exceptional credit.
Fortunately, you don't need to have a perfect credit score of 850 to be approved for a personal loan or credit card. In addition to having a good credit score, there are other guidelines and requirements you should keep in mind before you apply for a personal loan. Generally, you'll need a score of at least 550 to 580 to qualify. Best Egg loans are unsecured or secured personal loans provided by Cross River Bank, a commercial bank authorized by the state of New Jersey, member of the FDIC, equal housing lender, or Blue Ridge Bank, a nationally certified bank, member of the FDIC, equal housing lender. Unlike credit cards, personal loans often have terms that allow you to repay equal amounts over a period of a few months to a few years. Improving your credit score can greatly help you qualify for a personal loan and get a better interest rate.
Personal loan companies generally like to see a Debt-to-Income (DTI) ratio of 36% or less; however, some allow a DTI ratio of up to 50%. We've briefly mentioned some of the common components of a typical credit score in these tips, but if you want to know all the factors that could influence your score, you'll find them (and the level of influence they have on your score) in the graph below. Revolving credit refers to credit cards because there is no firm cancellation date and the user can keep the account open for an unlimited period of time. To qualify for personal loans, borrowers will need a reasonable credit score, proof of income showing they can repay the loan, and some other required documentation. For example, making payments on time can help build your payment history, which can improve your credit score.
Banks, credit unions, online lenders, and peer-to-peer lenders offer personal loans, but some have strict qualification requirements while others offer bad credit loans at higher rates. Ultimately, the decision to get a personal loan depends on what is important to you and your financial situation. This factor alone determines 30% of your credit rating, so you should pay close attention to its use if you want to improve your rating. This is a great way to get a good interest rate and an attractive loan term even if your credit score for a personal loan is low. This is because Discover uses a soft credit consultation during its prequalification process which is useful if you have fair credit.
The three major credit bureaus (Experian, Equifax and TransUnion) offer free credit reports annually. When calculating your score, FICO will analyze any new credit inquiries you have made or any new debts you have incurred in the last 6 to 12 months. Your payment history determines 35% of your credit score so making timely and regular payments is critical to improving your score.