How Credit Scores Affect Personal Loan Eligibility and Rates
Your credit score is a three-digit number, typically ranging from 300 to 850, that lenders use to assess how likely you are to repay borrowed money. Higher scores generally indicate greater creditworthiness, which makes it easier to qualify for a loan and can result in a lower interest rate.
Lenders often view borrowers with credit scores below 670 as higher risk. As a result, they may charge higher interest rates, impose more restrictive terms, or require additional steps such as a co-signer or collateral. Understanding where your credit stands and how lenders interpret it is the first step toward getting a personal loan with fair or bad credit.
- Fair credit is often defined as a FICO score between 580 and 669. Scores below 580 are typically considered poor or bad credit.
- Your payment history and credit utilization (the amount of available credit you use) are major factors in your credit score.
- Lenders may have their own minimum credit score requirements, which vary by lender and product.
Sources: Consumer Financial Protection Bureau, Citi, Bankrate
Typical Rates for Bad Credit Borrowers
Personal loan annual percentage rates (APRs) generally range from about 7% to 36%, with borrowers who have bad credit typically receiving offers near the top of that range. Your exact rate depends on your credit history, income, and other factors.
According to NerdWallet's prequalification data from August 2026, based on anonymized offers to its users rather than a nationwide average, average APRs trend higher for lower credit bands: around 27.21% for scores 300–629, 23.73% for 630–689, 19.51% for 690–719, and 14.84% for 720–850. Your actual rate may differ.
- Borrowers with lower credit scores are often offered higher APRs and may face larger fees.
- Rates change frequently and vary by lender, so it's wise to compare multiple offers.
- The APR includes both the interest rate and certain fees, so it gives a fuller picture of the loan's cost.
Sources: NerdWallet, Bankrate, Citi
Lenders That Consider Bad Credit
While many traditional banks have strict credit requirements, some lenders are more flexible and specifically consider applicants with lower scores. These lenders may use alternative data or offer secured options to reduce their risk.
Examples include Upstart, which considers factors beyond your credit score (like education and employment) and has a minimum credit score of 300; Avant, which offers APRs from 9.95% to 35.99% and loans from $2,000 to $35,000; and OneMain Financial, which offers secured loan options.
- Upstart: minimum credit score 300; uses education, employment, and income in addition to credit score.
- OneMain Financial: offers secured personal loans, which might be easier to obtain with bad credit.
Sources: CNBC Select, Upstart
Strategies to Improve Approval Odds
If your credit score is below what most lenders prefer, there are several steps you can take to improve your chances of getting approved and securing a better rate. These strategies focus on managing your credit and choosing the right lender.
Before applying, check your credit report for errors and dispute any you find. Keep your credit card balances low and make all payments on time. Consider a secured personal loan or adding a co-signer with good credit to strengthen your application.
- Review your credit report regularly and dispute any errors, as inaccurate information can drag down your score.
- Keep your credit utilization below 30% and avoid applying for multiple credit accounts at once, as hard inquiries can lower your score.
- A co-signer with good credit can increase your chances of approval and may help you get better terms.
- Some lenders let you prequalify with a soft credit check, which does not affect your score.
Sources: Consumer Financial Protection Bureau, Citi, NerdWallet, Upstart
Avoiding Predatory Offers
When you have bad credit, you may receive offers that seem too good to be true—and they often are. Some lenders target borrowers with poor credit and charge extremely high fees or include terms that can trap you in debt.
Be wary of any loan that does not check your credit at all. While 'no credit check' loans may seem convenient, they can come with very high APRs and fees, and may not help you build credit. Also, understand all fees before signing, including origination fees (which can range from 1% to 10% of the loan amount) and late payment fees.
- Avoid payday loans and other high-cost, short-term loans that can lead to a cycle of debt. They are illegal in some states due to excessive costs.
- Look for lenders that clearly disclose APR and all fees upfront.
- Never pay an upfront fee to 'guarantee' a loan—that is a common scam.
Sources: Consumer Financial Protection Bureau, Citi, CNBC Select
Alternatives to Personal Loans
If you cannot qualify for a personal loan with reasonable terms, consider other options that may be less risky or help you build credit.
Credit unions often offer more favorable terms than online lenders and may be more willing to work with borrowers who have lower credit. A secured credit card or credit-builder loan can help you establish a positive payment history. If you are a homeowner, a home equity loan or HELOC might be available, but your home is used as collateral.
- Credit union personal loans: often have lower rates and more flexible underwriting.
- Secured credit cards: require a security deposit and can help you build credit when used responsibly.
- Credit-builder loans: designed specifically to help you establish credit.
- Home equity loans/HELOCs: involve collateral and may offer lower rates, but put your home at risk if you default.
Sources: Citi, Consumer Financial Protection Bureau
Frequently asked questions
What is the minimum credit score needed for a personal loan?
There is no single minimum. Lenders set their own requirements. Some, like Upstart, accept scores as low as 300, while others may require higher scores. Keep in mind that a lower score usually means higher APRs and stricter terms.
Sources: Upstart, CNBC SelectWill checking rates hurt my credit?
No. Prequalifying or checking rates with most lenders uses a soft credit inquiry, which does not affect your credit score. A hard inquiry occurs only when you submit a formal application, and that can impact your score.
Sources: NerdWallet, UpstartWhat are the risks of 'no credit check' personal loans?
These loans often have very high APRs and fees, and they may not report your payments to credit bureaus, so they don't help you build credit. Some are payday loans, which can carry triple-digit interest and lead to a debt cycle. They are illegal in some states.
Sources: Citi, Consumer Financial Protection BureauCan a co-signer help me get approved?
Yes. A co-signer with good credit can increase your chances of approval and may help you secure a lower APR or better terms. However, the co-signer is legally responsible for repaying the loan if you default, and missed payments will affect both of your credit scores.
Sources: Citi, Consumer Financial Protection BureauWill applying hurt my credit more?
Applying for a loan involves a hard credit inquiry, which can lower your credit score slightly, especially if you apply to several lenders within a short period. To minimize the impact, space out applications and prequalify with soft inquiries whenever possible.
Sources: Consumer Financial Protection Bureau, NerdWalletSources
- Understand your credit score | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau
- How to deal with “bad credit”—or no credit—when you want to buy a home | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau
- Do personal installment loans have fees? — Consumer Financial Protection Bureau
- Seven factors that determine your mortgage interest rate — Consumer Financial Protection Bureau
- What is a credit score? | Consumer Financial Protection Bureau — Consumer Financial Protection Bureau
- Personal Loans for Fair Credit | Citi.com — Citi
- Best Personal Loans of September 2026: See Rates and Requirements — NerdWallet
- How To Get A Personal Loan: 7 Steps & Expert Tips — Bankrate
- Best Personal Loans for Bad Credit of September 2026 — CNBC Select
- Loans for Bad Credit: More Ways to Qualify — Upstart