Can You Get a Personal Loan With a 600 Credit Score?

You may qualify for a personal loan with a lower credit score, but expect to pay higher rates

Getting a loan with a low credit score can be more difficult, but there are some lenders that work with borrowers who have FICO credit scores of 600 or even lower. Such loans typically come with higher interest rates, and sometimes extra requirements, but they are a way to obtain money relatively quickly when you need it.

Key Takeaways

• Before granting you a personal loan, a lender will look at your credit score and credit reports.
• Having a lower credit score won’t necessarily disqualify you, but it may mean paying a higher interest rate.
• If you can’t get (or decide you don’t want) a personal loan, there are alternatives, including credit cards and home equity loans.
• Time permitting, you can also try to improve your credit score before you apply.

How Your Credit Score Impacts Your Personal Loan Offer

Lenders use potential borrowers’ credit scores to help evaluate their creditworthiness. You do not need a specific credit score to get a personal loan, but it will be easier to get one with a higher score. An excellent credit score will also make you eligible for a better interest rate on the loan.

Lenders often want to see at least a “good” credit score, generally considered to be 670 or above. But there are many lenders that offer personal loans for borrowers who have bad credit. If you have a credit score of 600 or lower, any loan that you qualify for will likely come with a higher interest rate and more frees, so the overall cost of the loan will be higher.

Lenders that work with borrowers who have lower credit scores may also have additional requirements. For example, you may need to provide collateral for a secured loan, rather than qualifying for an unsecured loan.

How to Apply for a Personal Loan With a 600 Credit Score

When you decide you are ready to apply for a personal loan:

• Determine how much you need. Are you planning to get a personal loan for debt consolidation, to cover an unexpected expense, or to fund a home improvement project? Consider your goal and how much you need to borrow to achieve it.
• Take stock of your financial situation. What is your credit score? Consider your income and debt levels. Will you be able to afford the monthly payments?
• Prequalify with multiple lenders. Find lenders that are willing to work with borrowers who have lower credit scores. Prequalify with these lenders to compare interest rates, fees, and loan terms. Use a personal loan calculator to determine what your monthly payments and total loan costs could be.
• Gather the necessary paperwork. Once you have selected the best loan offer, gather the necessary paperwork. Lenders will typically want to see your ID, proof of residence, pay stubs, and tax returns.
• Apply. Once you are ready, you can submit your application. You may need to do this in person if you choose a traditional lender like a bank or credit union. Or, you may be able to apply online. Some lenders are online-only.

Some lenders make same-day approval decisions, while others may take a few days. It is typical to receive your loan funds within a few business days of approval.

Note

Credit scores generally range from 300 (worst) to 850 (best).

How to Raise Your Credit Score Quickly

It can take time to build or rebuild your credit, but there are steps to take that can relatively quickly improve your score.

• Dispute errors on your credit report. Credit report errors—such as supposedly unpaid bills that you know you paid—can damage your credit score. You can obtain your credit reports from Equifax, Experian, and TransUnion, the three major credit bureaus, free of charge at least once a year at AnnualCreditReport.com. If you find any damaging errors, you can dispute them with the credit bureau, which is required to investigate. Once the error is fixed, your score should increase.
• Commit to paying your bills on time. On-time payments account for 35% of your credit score—the largest single factor. So take a look at your credit bills, catch up on any late payments, and try to make sure that all of your future payments arrive on time. Signing up for automatic bill payments can help keep you on track.
• Lower your credit utilization ratio. Your credit utilization ratio is considered a measure of how well you manage your debt. It compares the amount of credit that’s available to you to how much you’re actually using. You can boost your score by paying down your debt. Aim to keep your utilization at 30% or below.

Best Personal Loans With a 600 Credit Score

These lenders offer some of the best personal loans for people with bad credit, according to Investopedia’s latest analysis.

TD Bank

TD Bank’s Fit Loan could be a good option. You can apply with a credit score as low as 300, and you can potentially borrow up to $50,000. TD Bank does not charge an origination fee for this loan. APRs range from 9.99% to 23.99%. But note that this loan is only available in Washington, D.C., and 15 states.

Upstart

Upstart also offers personal loans to borrowers with credit scores as low as 300. The maximum amount that you can borrow is $50,000. APRs range from 7.80% to 35.99%.

What Are Some Alternatives to a Personal Loan?

A personal loan is not your only option if you need to borrow money. You can consider alternatives, such as a credit card, a line of credit, or a salary advance if your employer makes them available. If you own a home you may be eligible for a home equity loan or home equity line of credit (HELOC).

What Is the Minimum Credit Score for a Personal Loan?

There is no official minimum credit score for a personal loan, so requirements will vary from lender to lender. In many cases, you will need a credit score of at least 580. But there are lenders that work with people who have lower credit scores.

How Much Can I Borrow With a 600 Credit Score?

The amount of your loan offer will differ depending on the lender, as well as on factors like your income and credit history. In general, personal loans are often available in amounts up to $50,000.

How Can I Lower My Lender’s Interest Rate if I Have a Low Credit Score?

If you have a low credit score, you may be able to get a better interest rate by applying for a secured loan or working with a co-signer. If you aren’t in a rush, there are also steps you can take to improve your credit score.

What Are Other Factors Lenders Consider Beyond My Credit Score?

While your credit score is important, it is not the only factor lenders consider when evaluating your application for a personal loan. Your income, debt-to-income ratio, employment history, and available collateral are also potential criteria.

The Bottom Line

It is possible to get a personal loan with a credit score of 600 or even lower. Consider prequalifying with a few lenders to avoid a hard credit inquiry and to compare multiple offers. Then evaluate the interest rate, fees, and terms of each offer to select the best deal for you.

Read the original article on Investopedia.