What Credit Score Do I Need for a Personal Loan?
In our society, credit scores dominate our lives. These numbers help companies and other entities determine our financial history, our ability to pay off loans, and the risks associated with us. The better your credit score, the easier it is to get your own place, purchase a cell phone, and even get a great insurance plan.
And your credit score is crucial when it comes to your ability to take out a loan. When faced with an emergency that exceeds your current financial situation, you’ll specifically need a personal loan. And your credit score will make or break your chances of successfully taking out a personal loan. If you anticipate having to take out such a loan, or if you need one now, here’s a guide to what that will entail.
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An overview of credit score meanings
Everyone has credit. Depending on your credit history and your current financial situation, your credit score may range anywhere from the minimum of 300 to the maximum of 850. As a general guideline, scores which fall between 300 and 349 indicate a user who has no credit, scores between 350 and 650 are considered poor credit, scores between 651 and 690 are considered fair credit, scores between 691 and 720 are considered good credit, and scores between 721 and 850 are considered to be excellent credit.
Although the exact method used to calculate credit scores is kept under wraps, it’s estimated that credit scores are comprised of your payment history (likely around 35 percent), the amount of money you owe (30 percent), the length of your history (15 percent), your new credit (10 percent), and the types of credit sources you have used (10 percent).
What’s the minimum credit score for a personal loan?
It’s difficult to pinpoint an exact minimum requirement for a personal loan, as different lenders have different requirements for their borrowers. That being said, the bare minimum required by quite a few lenders is located between 580 and 600. From the lender’s perspective, a score below this minimum indicates a higher risk that the borrower won’t pay them back in the future. To back this up, studies show that 60 percent of individuals with a score of 579 or less have an increased likelihood of becoming severely delinquent in the future. If you have a score slightly below the bare minimum or even further below, it will be rather difficult or near impossible to get a personal loan. If you can get your hands on one, you will most likely have to pay higher interest rates.
The reason you’re requesting a personal loan is another important factor. For example, if you need a payday loan, you will most certainly pay more and you’ll need a higher credit score to qualify. However, if you visit a credit union in Harvey, LA to get a personal loan so you can apply to accredited liberal arts degree programs, you may stand a better chance.
What are my current options?
Although things may look bleak, there are ways that you can still try to get a personal loan. Some of these methods include getting a secured loan, finding a family or a friend who is willing to lend you money, finding someone who will cosign with you, or finding lenders who specialize in providing loans to borrowers with poor credit scores. You should also be working on your credit in order to improve your chances in the future.
Your credit score is important in all aspects of your life. And as you can see here, it plays a huge role in your ability to borrow money. Regardless of whether you may need to borrow money in the future, understanding your credit score is crucial to better controlling your financial situation.https://www.financelevel.us/loans/what-credit-score-do-i-need-for-a-personal-loan.htmlhttps://www.financelevel.us/wp-content/uploads/2018/11/credit-score-needed-for-personal-loan-1140x524-1024x471.jpghttps://www.financelevel.us/wp-content/uploads/2018/11/credit-score-needed-for-personal-loan-1140x524-300x300.jpgloans