While the real formulas that make up a FICO® Score are a bit of a mystery, you’re able to understand the weight given to each factor that goes into your score. Below are the factors that impact your FICO® Score and how much weight they carry.
1. Payment History (35%)
This one is the most straightforward. If you regularly make your monthly payments on time, it’s good for your credit score. Payments that are 30 or more days late can hurt your score. Also included in this category are potential negative marks like charge-offs, collections and bankruptcies. While charge-offs and collections remain on your report for 7 years, a bankruptcy may stay there for 7 or 10 years, depending on the type of bankruptcy you filed.
2. Amounts Owed (30%)
The category with the second-highest impact on your credit score is the amount owed on your debt. Here, you can exert a certain amount of control over the amount of spending you have on items like credit cards and other lines of credit. It’s best to use your accounts regularly but not so much that it looks like you’re overextending yourself. As a general rule, you don’t want to utilize more than 30% of your credit limit.
So, if you had a $10,000 limit, you wouldn’t want a balance of more than $3,000 at any given time. If you must carry a balance, try to keep it as low as possible to avoid paying more than necessary.
3. Length Of Credit History (15%)
If you have a long history of making on-time payments with a varied mix of revolving and installment loans, you’ll have a better credit score than someone just starting out.
4. Credit Mix (10%)
Lenders want to see a mix of installment loans, which may include car payments, personal loans and student loans. Lenders also like to see revolving accounts, such as those for credit cards. This combination shows that you can responsibly handle different types of debt, and you’ll boost the lender’s faith in your ability to repay your loan on time.
5. New Credit (10%)
Every time you get a new loan or credit card, your credit score takes a temporary hit. However, if you make your payments when they’re due and pay balances down or off, your credit score should go back up within 3 months or so.
FAQs
Payment history is weighed the most heavily in determining your credit score, along with your total outstanding debt. Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 800.
What is the lowest credit score to get a personal loan? ›
The typical minimum credit score needed to qualify for a personal loan is from 560 to 660, according to lenders surveyed by NerdWallet, but credit score requirements for personal loans vary across lenders and some may require a higher score.
Can I get a personal loan with a 600 credit score? ›
Yes, you can get a personal loan with a 600 credit score — there are even lenders that specialize in offering fair credit personal loans. But keep in mind that if you have a credit score between 580 and 669, you'll generally be considered a “subprime” borrower — meaning lenders might see you as a more risky investment.
What FICO score is used for personal loans? ›
For other types of credit, such as personal loans, student loans and retail credit, you'll likely want to know your FICO® Score 8, which is the score most widely used by lenders.
How much credit score is required for a personal loan? ›
Ideal credit score to avail a personal loan
The minimum CIBIL score for a personal loan is between 720 and 750. Having this score means you are creditworthy, and lenders will approve your personal loan application quickly. They may also offer you your chosen loan amount at a nominal interest.
What credit score do I need for a $5000 loan? ›
Requirements for a $5,000 loan vary by lender. But in general, you should have at least Fair credit, which is a score of 580 or above. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.
What credit score is needed for a $20,000 loan? ›
Generally, you'll need a good to excellent credit score — 670 or higher — to qualify for a $20,000 loan. The higher your credit score, the better your chances of qualifying for a loan and securing a lower interest rate.
What credit score is needed for a $10 000 loan? ›
Generally, you need a good to excellent credit score of 670 or above to qualify for a $10,000 loan. However, some lenders specialize in working with borrowers with fair or poor credit.
What credit score do I need for a $3,000 loan? ›
However, it is safe to say that if you want to have a decent chance to qualify for a $3,000 unsecured personal loan, you may want to have a minimum score between 610 and 640. Since $3,000 is not considered a large loan amount, you may be able to qualify with a lower credit score, but it all depends on the lender.
Can I get a 20k loan with 640 credit score? ›
The minimum credit score that a lender will approve for a personal loan is generally in the 610 – 640 range, but this can vary among lenders, and some institutions may require a higher score for a $20,000 loan. For a lower interest rate, aim for a score of at least 650.
Qualifications for a $40,000 personal loan
Most lenders evaluate the following before making a lending decision: Credit: Your credit score shows how well you have handled past borrowed money. To qualify for a $40,000 loan, you'll typically need a credit score upwards of 670 or a co-signer with good or excellent credit.
Is LendingTree legit? ›
LendingTree is accredited by the Better Business Bureau (BBB) and has an A+ rating. Several customer complaints mention unwanted marketing contact from the company and difficulty unsubscribing. LendingTree is typically quick to respond.
Do personal loans look bad on credit? ›
A personal loan will cause a slight hit to your credit score in the short term, but making on-time payments will bring it back up and can help improve your credit in the long run. A personal loan calculator can be a big help when it comes to determining the loan repayment term that's right for you.
What is the minimum credit score to get a personal loan? ›
To qualify for a personal loan, borrowers generally need a minimum credit score of 610 to 640. However, your chances of getting a loan with a low interest rate are much higher if you have a “good” or “excellent” credit score of 670 and above.
How many points does a personal loan drop your credit score? ›
Lenders will run a hard credit pull whenever you apply for a loan. This will temporarily drop your score by as much as 10 points. However, your score should go up again in the following months after you start making payments.
What is the minimum Equifax score for personal loan? ›
There is no fixed number that can be marked as a minimum CIBIL Score for personal loan approval. However, a CIBIL score of 750 or above and as close to 900 is a good score and can open multiple loan options for you.
Can I get a personal loan with a 500 credit score? ›
You can borrow money with a 500 credit score, but don't expect great options. Bad credit personal loans will emphasize your income more than your credit score. Securing a loan with a 500 credit score may be challenging, but that doesn't mean every lending door is closed.
Can you get a $5,000 personal loan with no credit? ›
Yes, it is possible to get a loan with no credit or bad credit, but lenders will likely charge you a higher interest rate than if you had established credit history.
What credit score do I need for a $10,000 loan? ›
To increase your chance of qualifying for a $10,000 unsecured loan, you should have a credit score of 600 or higher. Some lenders start their minimum credit score requirements at 600, however, there are some lenders that require a credit score in the high 600s or low 700s.
What is the lowest credit score lenders will accept? ›
However, it depends on the lender or financial situation. It's always important to check with your prospective lender, but generally, according to Experian™, most mortgages require about a 620 score. The lender may require a larger down payment to compensate for a low credit score.
