Your credit score can change based on your behavior, so you may improve your credit by addressing certain factors that impact your credit.
How your credit score can impact your personal loan application
Your credit score is typically a critical factor when you apply for a loan, though the required credit score for a personal loan varies by lender.
In general, the higher your credit score, the better your personal loan approval odds. That's because lenders typically see a high score as a sign of a more trustworthy borrower, while a lower credit score may signal a higher-risk borrower.
Lenders might also use your credit score to help determine your interest rate and repayment options, so improving your score may help you pay less in interest.
Other common personal loan requirements
Alongside your credit score, personal loan lenders may also consider factors like:
- Debt-to-income (DTI) ratio: This compares your monthly income to your debt obligations. Lower DTI ratios are more favorable.
- Income: In general, lenders want to make sure you can afford your loan payments and meet their minimum income requirement.
- Age: Lenders may have minimum age requirements.
While you may not be able to change some of these factors, it’s important to be aware that they can affect your ability to qualify for a personal loan, how much you can borrow and your interest rate.
Tips for building credit
These tips may help you improve your chances of qualifying for a personal loan:
- Make sure your credit report is free of errors. You are eligible to receive a free credit report from the 3 major credit reporting agencies each week. If you find an error, you can dispute that with the corresponding credit bureau and lender. Keeping an eye on your credit report may help ensure that erroneous entries don’t affect your ability to borrow.
- Make debt payments on time. Payment history is a significant factor in your credit score, and paying back your credit cards and loans on time assures lenders that you’re responsible enough to take on more debt.
- Lower your credit utilization. Credit utilization refers to the percentage of available credit you use compared to your total available credit. Using a smaller amount of your available credit can help improve your credit score, which may make it easier to qualify for a personal loan.
When you’re ready to apply for a personal loan, you can start looking for options that meet your needs. Citi offers personal loans to both existing and new Citi® customers that meet specific eligibility criteria, including general creditworthiness along with additional factors determined by Citi.
If you think you could benefit from a Citi® Personal Loan, you may apply online today.
FAQs: Personal loans and credit scores
Does a personal loan affect your credit score?
A personal loan may impact your credit score in several ways. For example, applying for a loan requires a hard credit inquiry, which can have a small, temporary impact on your credit score. However, using a personal loan to consolidate credit card debt may lower your credit utilization and help improve your credit score.
Can you get a personal loan with bad credit?
Some lenders may accept an applicant with a low credit score, but those lenders may, in turn, offer higher interest rates and fees.
What is a good credit score for a personal loan?
It depends on the lender's credit score requirements. Personal loan pre-qualification may help you understand whether you’re likely to qualify for a given personal loan without impacting your credit score.
This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
