Personal loans can help meet a range of financial needs, from paying off debt to financing home improvements. But the type and interest rate you qualify for depends on various factors – one such being your credit score. A higher credit score can enable you to qualify for larger Sudbury loan amounts with lower rates; conversely, low scores could prevent access to any personal loan loans at all.
Lenders typically require that individuals with bad or fair credit scores meet a minimum credit score requirement of 670 to qualify for personal loans; however, minimum requirements vary between lenders and some may have more flexible requirements for individuals with lower scores.
Credit scores are among the primary criteria lenders consider when reviewing loan applications, and are determined by Experian, TransUnion and Equifax reporting services. Your score demonstrates how effectively you have managed your accounts and paid bills on time.
Your credit report contains details about your payment history, amount owed, credit utilization ratio and length of history – each factor accounting for different percentages in determining your score. Your payment history comprises 35% of it with late payments taking a bite off up to 30 points off it; credit utilization ratio (the ratio between what debts you owe on cards/debt vs total available credit) accounts for 30% while length of history accounts for 15%.
Applying for a personal loan can cause your credit score to take a hit, as the lender runs a hard credit inquiry to assess your creditworthiness. Although these inquiries will appear on your report and make the exact impact difficult to gauge, most drops usually disappear within months as long as no further loans or accounts are opened or accounts opened up in their place.
Some lenders may still extend personal loans to people with poor or fair credit, although they will likely charge higher interest rates and fees. Illion and Experian consider anyone with a credit score below 579 to have poor or fair credit; Equifax considers such scores acceptable.
Lenders will consider your employment status and income when making their decision on whether or not to approve or deny your personal loan application. Proof of income such as pay stubs or tax returns may be required by some lenders, while others offer secured loans that require you to pledge assets as collateral to secure their loans; these types of loans can be more difficult for people with bad or no credit due to increased risk.