A good rate for your personal loan will depend on your specific financial situation. While you may be eligible for several different types of personal loans with a 700 credit score, the actual interest rate you’re offered will depend on more than just your score.
According to FICO the average credit score for Americans as of April 2022 was 716.1 If you have a 716 or close to a 700 credit score and are thinking about a personal loan, you may be curious about what a good rate is.
Where Does a 700 Credit Score Stand?
Having a credit score of 700 is a good achievement. This falls right into the “good” credit score range according to FICO. This stands for Fair, Isaac, and Company and it’s a data analytics company that tracks people’s borrowing habits and assigns them a three-digit number based on their “creditworthiness.”
Creditworthiness describes how trustworthy you are when it comes to borrowing money. If you have a history of making on-time monthly payments, you don’t misuse your credit cards, and your overall debt load is fairly low then you’re likely to be considered creditworthy. If you’ve defaulted on your loans in the past, have too much credit card or other debt, you may not be considered creditworthy. This means you might have a hard time getting loans or a good interest rate.
A Breakdown of a FICO Score
So who exactly is viewed as creditworthy, and who isn’t? This is a great question to ask if you’re in need of a personal loan. The FICO scoring model breaks down borrowers into the following categories based on their credit score:
|FICO Score Range||Rating|
|800 – 850||Exceptional Credit|
|740 – 799||Very Good Credit|
|670 – 739||Good Credit|
|580 – 669||Fair Credit|
|0 – 579||Bad Credit|
Keep in mind, lenders may have slightly different interpretations or thresholds for each category.
Many personal loan lenders have a minimum credit score requirement, and so having a poor credit score can make it harder to get access to personal loans. Those with the best credit scores will have access to the best personal loans—loans with a low interest rate/costs, flexible repayment and monthly payment, etc.
How Does a 700 Credit Score Impact Your Personal Loan Options?
As you can see based on these categories, your 700 credit score puts you in the “good” range. This is a great achievement, as it’s not always easy to build a good credit score. But what does this mean for the loans and the interest rate you may be offered?
Well with a 700 credit score, you will probably be eligible for a number of different credit and loan offers, and likely a decent interest rate. Generally, you can expect interest rates to fall between 3% to 25% when your credit score is 700.
Keep in mind interest rates aren’t the only cost of the loan, there will be fees such as an origination fee to look out for. To get the true cost of a personal loan pay attention to the annual percentage rate rather than the average interest rate.
However, personal loan lenders will not look at just your credit score for approval, they will also pay attention to your monthly or annual income, credit history, and existing expenses. Here is more information on those factors:
Income may be just as important as a minimum credit score or excellent credit score with personal loans. Monthly or annual income provides personal loan lenders the ability to gauge whether a borrower will be able to repay the loan. A few lenders may ask for bank account verification, while most will ask for documents such as pay stubs, bank statements, etc. to verify income.
A credit score can give an in-person or online lender a quick snapshot of a borrower’s credit—it will give them a general understanding of whether a person has poor or good credit. However, a person’s financial history which is available on credit reports will provide an in depth look at their financial habits, experience, and major financial decisions or milestones. By reviewing these details a lender can figure out what their true risk is. Those with the best credit histories and score will have access to the best personal loans—which shouldn’t be too surprising. Here are some important things that will show up on your credit reports:
- Credit Utilization — Credit utilization refers to the percentage of your available credit that you are currently using. It is calculated by dividing your total credit card balances by your total credit card limits. A lower credit utilization ratio is generally better for your credit score. It is recommended to keep your credit utilization below 30% to maintain a healthy credit profile.
- Types of Credit Accounts — The types of credit accounts you have can impact your personal loan options. Lenders like to see a mix of different types of credit. Having a diverse mix of credit accounts demonstrates your ability to handle different types of debt responsibly.
- Past Bankruptcies —If you have had a bankruptcy or bankruptcies in the past, they can have a significant negative impact on your credit score and overall creditworthiness. Bankruptcy stays on your credit report typically for 7 to 10 years, depending on the type of bankruptcy filed.
- Debt-to-Income Ratio (DTI) — The debt-to-income ratio compares your monthly debt to your gross monthly income. It is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI ratio is generally preferred by lenders, as it indicates a lower level of financial burden and higher capacity to take on new debt.
Your Ability to Repay the Personal Loan
And lastly, lenders assess your ability to repay a personal loan based on several factors, including your income, employment stability, and existing debt obligations. They want to ensure that you have sufficient income to cover the loan payments without causing financial strain.
You can find personal loans with credit unions, banks, private lenders that operate in person or online. A credit union or bank may have stricter requirements and more ridgid loan terms. However, if you have a good credit score such as 700, then you will likely have a good amount of lending options to choose from.
Keep in mind the best personal loans are personalized to your budget. The monthly payment will be affordable, the repayment terms will be flexible, and
Comparing Secured and Unsecured Personal Loans
When looking to borrow money you will likely find the option of an unsecured personal loan or a secured personal loan. Secured loans involve an asset while unsecured personal loans do not. Generally, secured personal loans are easier to qualify than unsecured. Either of these loan types can be installment loan options or lines of credit.
How Can I Get a Good Credit Score?
Let’s say you have a fair or poor credit score, you may be curious about how you can get a good or excellent credit standing. The good news is that improving your scores with the credit bureaus may be possible! There are several strategies you can employ to improve your credit score. These include paying your bills on time, reducing your overall debt, keeping your credit card balances low, and not applying for new credit too frequently. Here are some more details on this process:
Making Your Bill Payments on Time
Payment history is the largest factor that impacts credit, and so on-time payments can really help you get to that good or excellent credit score range that you may be aiming for. Avoiding late monthly payments is also a crucial part of this step.
Reduce Your Debts
Another thing you can do to help your credit score is to pay off debt. This can help you because it can lower your credit utilization ratio. Your credit utilization measures the amount of debt you have to the amount of credit. The lower this is the better it will be for your credit score. If you are struggling with repaying your debts there are several strategies out there that can help such as debt consolidation. Debt consolidation is the process of combining your debt so you have one loan and one payment—just one of the many strategies out there.
Be Mindful of Credit Card Other Revolving Credit Accounts
If you are trying to improve your credit you should be mindful of your credit accounts that are revolving. The most common type of revolving credit accounts include credit card debt. These types of credit accounts can be harmful because they can impact your credit utilization in both ways—open credit and used up credit.
Limit New Credit Inquiries
When you apply for a new loan or credit card most lenders will conduct a hard credit check. A hard credit check can bring down a credit score by a few points, and having multiple may harm a credit score quite a bit. And so, if you are trying to improve your credit, try to avoid multiple hard credit checks.
Be Aware of Good or Bad Credit
Having a diverse credit portfolio can help your credit score. And there are some loans/credit accounts that are considered better than others. For example, having a lot of credit card debt may not look as good as having a personal loan, student loan, and a credit card. Diversity can show that you can handle a wide variety of accounts.
These are just some things you can do to improve your credit. For a personalized approach, take a look at your credit report and spending habits. There are also professionals you can talk to.
FAQs for Personal Loans With a 700 Credit Score
Here are some commonly asked questions about personal loans for borrowers who have a 700 credit score:
While a 700 credit score is generally considered good and may make you eligible for a variety of personal loans, the specific requirements can vary depending on the personal loan lender and the type of loan. Some lenders may have stricter requirements, while others may be more lenient. It’s always a good idea to research and compare different loan options before applying.
38 percent of adults ages 18 to 24 say they never check their credit scores 2 and if you fall into that category you may want to consider checking your score. It’s a good practice to check each of your credit reports at least once a year to ensure there are no errors. If you have a credit monitoring service they will let you know about errors and can even start the correction process! Many financial institutions and credit card issuers provide free credit score updates to their customers, which can be a helpful tool for monitoring your credit on a more frequent basis.
Yes, it may still be possible to get a personal loan with a credit score below 700. However, you may face higher interest rates or more stringent terms. Some lenders specialize in loans for people with lower credit scores, these loans may be called bad credit loans, so it’s worth exploring multiple lenders to compare loan offers.
When you apply for a loan, lenders typically perform a hard credit check, which can temporarily lower your credit score by a few points. However, the impact is usually small and temporary, and your score should recover as you make timely payments on your new loan.
The key to maintaining a good credit score after getting a personal loan is to make your loan payments on time, every time. Late or missed payments can have a significant negative impact on your credit score. Also, try to keep your overall debt levels low, as high levels of debt can also hurt your score.
Besides your credit score, lenders may also consider your employment status, annual or monthly income, debt-to-income ratio, and the purpose of the loan proceeds before they extend credit. They use these factors to assess your ability to repay the loan and will impact loan terms, loan amounts and loan costs.
A Note From CreditNinja About Personal Loans
At Credit Ninja, we want to make sure that you are informed about your finances and credit scores play a huge role in that. Understanding your credit score and credit history is essential to financial literacy. To learn more about credit scores, credit reports, and credit history check out our blog pages!