What is the Lowest Credit Score You Can Have to Get a Loan?

Having a low credit score can make it difficult to get approved for a loan. Learn what the lowest credit score is that you need in order to get approved.

What is the Lowest Credit Score You Can Have to Get a Loan?

Having a low credit score can make it difficult to get approved for a loan. However, there are ways to improve your chances of being approved. Generally, you'll need a score of at least 550 to 580 to qualify for a personal loan. The exact minimum credit score required for approval will depend on the lender.

Some lenders may tell you in advance what your minimum requirements are. For instance, repayment of personal loans requires a FICO score of 640 or higher for approval. FHA loans (mortgages backed by the Federal Housing Administration) have the lowest credit rating requirements of any major mortgage loan program. It's easy to get confused about what the lowest credit score is, as it would make more sense to start at 0.

Credit scores haven't always used 300 as the lowest score either. Some older models, along with some industry-specific scores still in use today, use 0, 250, or 300 as the lowest possible credit score. But pretty much any score that most people see today uses the standard scale of 300 to 850. Your credit score may change each time new information is added to your credit report or old information is deleted.

Making payments on time can help build your payment history, which can improve your credit score. If you're looking to buy or refinance and you know you might need to improve your credit score, it may be helpful to call a loan counselor right now, even if you're not sure you qualify. If you encounter problems with your credit history after applying for a mortgage loan, it may be too late to raise your credit score. If your lender obtains all three of your credit scores, you'll use the average score for consideration. Applying for loans online may be a good option for borrowers with bad credit, especially if you apply through an online loan network.

The score largely depends on your creditworthiness, which is usually a combination of your credit history and score, in addition to income and debt. FHA loans can benefit borrowers with lower credit ratings or those who spend a significant portion of their income on housing. Many lenders will issue government-backed FHA loans and VA loans to borrowers with credit scores as low as 580. When this happens, you may need to increase your credit score, lower your DTI (debt-to-income ratio), or increase your down payment to qualify. You can do this by demonstrating that you are responsible with credit, for example by making timely payments and reducing your debt-to-income ratio and credit utilization.

Conventional loans are often better for those with good or excellent credit, as these loans require a higher credit score than government-insured loans. A lender may say they require a minimum of two or three years of credit history, but generally, longer is better. To qualify for the Home Possible Loan with Reduced Private Mortgage Insurance (PMI) rates, most lenders will require a credit score of 660 or better. People may consider taking out a personal loan to cover an expense because they usually have lower interest rates compared to credit cards, although rates can also be variable. There is an unsecured personal loan available for almost all credit scores and even some that don't require any credit checks.