How to get a personal loan with fair credit

A personal loan allows you to borrow money from a lender and pay it back over time with interest. Personal loans can be helpful when it comes to making big purchases. And they can be used to consolidate high-interest debts.

But if you have fair credit, you may be wondering whether you can get a personal loan. The good news: There’s no specific minimum credit score required to be approved for a personal loan. Lenders decide for themselves what credit scores are needed for approval. But the lower your credit scores, the harder it might be to get approved—and the higher your interest rate might be. Read on to learn more about getting a personal loan with fair credit. 

What’s considered a fair credit score depends on the score you’re looking at and the credit-scoring model that calculated it.

FICO® and VantageScore®, for example, are two common credit-scoring companies. Both companies calculate credit scores that range from 300 to 850. But FICO and VantageScore have slightly different criteria for what’s considered a fair credit score.

• FICO considers a fair credit score to range from 580 to 669.
• VantageScore says a fair credit score ranges from 601 to 660.

Keep in mind that no matter the credit score, the same factors are generally used to calculate it. These are some of the factors that the Consumer Financial Protection Bureau (CFPB) says “make up a typical credit score”:

• Payment history: How well you’ve done making payments on time.
• Debt: How much current unpaid debt you have across all your accounts.
• Credit utilization: A ratio—usually expressed as a percentage—that reflects how much of your available credit you’re using. According to the CFPB, experts recommend keeping your credit utilization below 30%.
• Loans: How many loans and what kinds they are, such as revolving credit accounts and installment loans. This is sometimes called your “credit mix.”
• Credit age: How long you’ve had your accounts open. Keep in mind that what qualifies as your oldest credit account depends on what’s being shown in your credit reports.
• New credit applications: How many times you’ve applied recently for new credit. The effect on your scores might be minor, but a lot of new hard credit inquiries could still give a negative impression to lenders.

If you’re considering a personal loan, credit is important. The better your credit scores, the better your chances of qualifying for a personal loan—and the better your interest rate might be.

And remember: It’s ultimately up to lenders to decide for themselves what credit score is needed for approval.

If you have fair credit and are considering a personal loan, here are a few steps you can take that could help you get approved.

Monitor your credit

Knowing your current credit situation can give you an idea of whether you might be approved for a personal loan. To see where you stand, you can get copies of your credit reports from the three major credit bureaus at AnnualCreditReport.com. 

CreditWise from Capital One is another way to monitor your credit. CreditWise lets you access your weekly TransUnion® credit report and your VantageScore® 3.0 credit score whenever you want—without hurting your credit. The built-in CreditWise Simulator can even help you see the possible effects that taking out a personal loan could have on your credit.

And the best part? CreditWise is free and available to everyone. You don’t even have to be a Capital One customer to use it.

Shop around

Different banks, credit unions and online lenders might have their own standards when it comes to who qualifies for a personal loan. And it’s important to find a lender whose terms work for you. Exploring different lenders and options can help you find the best fit.

See if you’re pre-qualified or pre-approved

Applying for a personal loan can result in a hard inquiry on your credit reports. Hard inquiries can have a negative effect on your credit scores. And too many hard inquiries over a short period of time can be even worse for your credit.

Finding out whether you’re pre-qualified or pre-approved for a personal loan can give you an idea of how likely you are to be approved. And if you don’t apply for loans you’re not likely to be approved for, that could help you avoid hurting your credit scores.

Consider a co-signer

Having a co-signer with good credit might help you get approved for a loan. A co-signer might also help you get a better interest rate. But keep in mind that if you make late payments or miss payments, it can hurt your own credit as well as your co-signer’s credit. And your co-signer is ultimately responsible for the loan if you can’t pay.

When you’re considering a personal loan, it can help to be aware of the other options that might be available to you.

Here are some alternatives to a personal loan:

• Credit cards: If you use a credit card responsibly, it can be a useful alternative to a personal loan. If you’re looking for options, you may be able to see whether you’re pre-approved with some issuers before you apply—without affecting your credit scores.
• Balance transfer: A balance transfer lets you move debt to a new or different credit card. It could help you combine your loans at a lower interest rate. But be sure you understand how it works and whether there are additional fees or restrictions.
• Cash advance: A cash advance is similar to using a debit card to get cash. But instead of the money coming from your bank account, it’s taken from your available credit. Cash advances can be convenient if you need cash, but they can also come with higher interest rates than purchases you make with your credit card. You might also have to pay certain fees.
• Peer-to-peer (P2P) lending companies: Companies that connect lenders and borrowers through online services are another possibility. P2P lending companies vary in how they review lenders and borrowers, including what’s required to qualify for a loan. The CFPB recommends that you make sure you understand all fees and interest charges associated with these types of loans.

Remember: There’s not a specific minimum credit score that’s required to be approved for a personal loan. But if you don’t have a good credit score, it could be more difficult to get approved for a personal loan. And the lower your credit score, the higher your interest rate might be.

So if you have fair credit and are considering a personal loan, you can take some steps to improve your chances of approval. And don’t forget that there might be other options available to you.