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, the required credit score for a personal loan is at least 580. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 800 and a high income.
What's the lowest credit score to get a personal loan? ›
Some may approve loans for scores as low as 580 or even 300, but scores above 640 often secure the best terms. Keep in mind that your credit score isn't a single number but varies based on different scoring models and lender calculations.
What credit score do you need for a $20000 personal loan? ›
Requirements for a $20,000 Personal Loan
This means they'll want to see your credit score, income level and DTI ratio. Requirements vary by lender, but most lenders require borrowers to have a credit score in the good to excellent range — meaning a score of at least 670.
How much credit score is required for a personal loan? ›
No lender specifies a minimum CIBIL score requirement for a personal loan application. However, a score of 750 and above is preferred by lenders for loan applications. This score reflects the creditworthiness of the borrower and the chances of lenders approving the loan application with this score increases.
What credit score is needed for a 1000 personal loan? ›
The specific credit score you need to qualify for a $1,000 loan can vary quite a bit among lenders. Most lenders look for good to excellent credit scores (670 or higher), but there are some that are willing to work with people who have less-than-perfect credit.
What credit score do I need for a $3,000 loan? ›
While some personal loan lenders allow you to apply with a very low credit score, many require a minimum credit score of 660 or 700 to be considered for a $3,000 personal loan. Generally, the higher your credit score, the less interest you will pay.
What credit score do I need for a $10,000 loan? ›
Requirements will vary across lenders. However, qualifying for a $10,000 personal loan typically requires a credit score that exceeds 640, an active checking account, and a steady, verifiable income, among other factors.
What credit score do I need for a $20000 car loan? ›
MINIMUM CREDIT SCORE FOR A CAR LOAN
However, most lenders look for a threshold of at least 600. However, this may vary depending on the lender, car, and loan type. A score of 700-850 is what most lenders consider ideal. Borrowers in this range can expect to get offered lower interest rates and more flexible loan terms.
What is the monthly payment on a $20,000 personal loan? ›
Advertising Disclosures
| Loan Amount | Loan Term (Years) | Estimated Fixed Monthly Payment* |
|---|
| $20,000 | 5 | $415.07 |
| $25,000 | 3 | $771.81 |
| $25,000 | 5 | $518.84 |
| $30,000 | 3 | $926.18 |
13 more rowsExample Monthly Payments on a $5,000 Personal Loan
| Payoff period | APR | Monthly payment |
|---|
| 1 year | 15% | $451 |
| 2 years | 15% | $242 |
| 3 years | 15% | $173 |
| 4 years | 15% | $139 |
3 more rowsMar 6, 2024
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 credit score do banks use for personal loans? ›
To qualify for a personal loan, borrowers generally need a minimum credit score of at least 580 — though certain lenders have even lower requirements than that. However, your chances of getting a low interest personal loan rate are much higher if you have a “very good” or “excellent” credit score of 740 and above.
How many points does your credit drop when applying for a personal loan? ›
When you apply for a personal loan, lenders will run a hard credit check to have access to your credit report and history. Hard credit checks temporarily lower your credit score by as much as 10 points. But if you have excellent credit, applying for a loan will most likely make your score drop by five points or less.
What credit score is needed for a 20000 personal loan? ›
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.
What is the minimum credit score for LendingTree? ›
You can check your credit score for free with LendingTree Spring — without impacting your credit. While credit scores range from 300 to 850, the minimum credit score for a personal loan is typically 580. However, borrowers with scores of 640 or higher tend to get better loan rates and terms.
How to get a loan when no one will approve you? ›
Getting a personal loan with a co-signer that has a strong credit score and a solid income can boost your application. Your co-signer – ideally, a family member or close friend – will apply alongside you, and you'll both be responsible for repayment of the loan.
Can you get approved for a personal loan with a 500 credit score? ›
If you have a 500 credit score, you need to find a lender that offers personal loans with a very low or no minimum credit score requirement. Some lenders share this information in the eligibility section of their FAQ, and many loan marketplaces list the minimum credit score requirements of their partner lenders.
What credit score do I need for a $2000 loan? ›
Upstart Overview
Upstart may offer you a loan even if you have poor credit, generally a score below 580. Of course, if you have a low credit score, you won't get the best interest rates Upstart has to offer. Upstart works with many different banks behind the scenes to fund its loans.
What credit score is needed for $5,000 loan? ›
Credit scores of 580 or under are considered "poor." A low credit score can significantly limit your chances of getting approved for a $5,000 loan. Most lenders require a minimum score around 670, which is considered a "fair" score.
What credit score do you need to get a $30,000 loan? ›
This allows them to look at your history from the past seven years and see whether you've typically made payments on time. For a $30,000 loan, you'll typically need a credit score above 600 just to qualify or above 700 to get a competitive rate.
