Personal Loan Advice & Articles

What Credit Score Do You Need for a Personal Loan?

November 10, 2014

If you're looking for a personal loan (also called a signature loan or unsecured loan), you probably want to know what credit score you'll need to get approved. In addition, your personal loan credit score determines your interest rate, so you'll want to know what sort of rate your FICO will get you.

"No Credit Check" Personal Loans Are NOT Personal Loans

A quick search online turns up all kinds of lenders willing to make you a "personal loan" or "signature loan" with no credit check. Too bad they aren't really personal loans – they're title loans, payday loans and cash advances by any other name. They're very short-term loans with extremely high fees and interest rates – beware!

Real Grades from Real Lenders

Personal loan underwriting is extremely fast – a look at your personal loan credit score and a glance at your paycheck may be all that's required. Consequently, personal lenders rely more heavily on credit scores and grades than other lenders might, pretty much the way credit card companies do. And just like credit card interest rates, personal loan interest rates diverge quite a bit.

Generally, lenders assign credit grades to applicants and then base their rates on those grades. Here's a sample grading system based on FICO scoring:

FICO Grade

760-850 A+

700-759 A

660-699 B

620-659 C

580-619 D

< 580 F

And here's a grading system based on Vantage Scores:

V-Score Grade

900-990 A

800-899 B

700-799 C

600-699 D

< 600 F

Great Rates and Rates to Hate

How does your credit grade affect your interest rate? Well, many lenders won't even grant personal loans to applicants at Grade C or lower (but some will – if you're in that category, you may just have to look a bit harder for your personal loan). Here's an example of November 2014 annual percentage rates (APRs) for a three-year loan from a lender that does make loans at most grades:

Grade Rate

A 6.63%

B 12.82%

C 13.82%

D 17.60%

E 18.54%

F 22.00%

G 24.06%

H 36.00%

And here's another lender's system, also as of October 2014. This is a credit union.

Grade Rate

A 9.9%

B 10.4%

C 11.4%

D 14.9%

E 16.9%

The bottom line? There are many personal loans out there and rates and terms vary a great deal. Shop carefully and get a lot of interest rate quotes if you want the best loan for your credit grade.

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