How High Does Your Credit Score Need to Be to Get a Loan?
Your credit score has a very big influence on whether you can get a loan or not. Although it's not the only factor that lenders take into account, it is the basis of many lending decisions. If you're intending to apply for a loan, it's very useful to understand how your credit score is likely to affect your chances.
This article explores how the range that your credit score falls into impacts your ability to get a loan and also looks at other factors that help to guide a lender's decisions.
Your credit score will fall into one of the following ranges:
- Excellent - Score of 720 or higher
- Good - Score between 680 and 719
- Average - Score between 620 and 679
- Poor - Score of 619 or below
We'll explore what each of these means.
Excellent - Score of 720 or higher
If your score is in this range, you can expect the lowest interest rates and best repayment terms on any loans that you take out. You shouldn't have any problems getting a mortgage, a credit card, a loan for a car or anything else.
Good - Score between 680 and 719
When your score lands in the 'good' range, you can still expect to be accepted for the vast majority of loans and will get preferential interest rates and repayment terms.
Understanding your credit score
Average - Score between 620 and 679
With a score of average, there is a chance that you might be turned down for some loans, particularly if your salary or the amount of credit you are asking for suggests that you might have difficulties making repayments. You should still be accepted for the majority of loans, although you may have to pay slightly higher interest rates and your repayment terms may not be as good as if you had a higher score.
Poor - Score of 619 or below
If your score is 619 or below, you will run into issues getting credit. This means that you may not be approved for mortgages, credit cards, loans or other types of lending. The lower your score is, the less likely you are to get a loan and the higher your interest rates will be. If your score is below 579, you can expect these issues to be even worse.
Other factors that influence if you will be able to get a loan or not
There are several other factors that lenders will take into account:
- Your salary and any other income - The more disposable income that you have, the better the chance of being accepted for credit. A higher salary means that you are less of a risk and that you will be able to make your repayments on time.
- The size of the loan - You're more likely to be accepted for smaller debts than larger ones.
- Secured versus unsecured loans - Lenders prefer to lend money on debts that are secured, for example on your house or car.
Have you ever had an issue getting a loan?
If you have a relatively healthy credit score, are asking for a reasonable amount of debt compared to your salary and have the disposable income to afford repayments, you shouldn't have an issue getting the credit that you need. If your credit score is low, you should aim to improve it as soon as possible before taking on any more debt.