Nowadays, you don’t need an excellent credit score to get a personal loan. Many borrowers with poor credit scores (600 and below) are still able to get approved for certain loan products. That being said, the better your credit score the better deals and interest rates you’ll get. Start working on improving your credit score so you can get larger, better loans in the future.
Your credit score is one of the main factors that lenders consider when reviewing your loan application. It’s a three-digit number that tells the lender how likely you are to make your payments on time, and pay off your loan. Having a low credit score may make it more difficult to be approved for good loans with lower interest rates.
Credit scores are broken down into several categories:
- 300–579: Poor
- 580–669: Fair
- 670–739: Good
- 740–799: Very good
- 800–850: Exceptional
Having a credit score between fair and exceptional will qualify you for more loan options, lower interest rates, better terms and conditions, and larger loan amounts. This is because the lenders will trust that you’re going to make your payments on time, and pay off the loan by the due date.
A score between “poor” and “fair” may make it difficult to be approved for a loan at all. And the loans that are available to you may not have the best rates or terms. Common loans for people in these categories include easy payday loans, pawn shop loans, title loans, and personal installment loans.
The best thing you can do for yourself (and your future self), is to make a plan to improve your credit score. A few of the most common ways to do that include: paying off your debts, lowering your credit card usage, making payments on time, and avoiding bankruptcies.
It takes a lot of hard work, time, and effort to improve your credit score. But it is possible. Start by creating a budget that includes all of the monthly expenses you have, and how much income you make each month. If you have any money left over after considering all of your expenses, put it toward any Outstanding debt you still have.