Are you interested in applying for a personal loan? Do you know your credit score? Are you concerned that your score will make it difficult to receive an approval?
Regardless of the loan type, it goes without saying that a good credit score always helps. Experian explains credit scores in great detail on this page, with the following excerpt among the most important:
“For a score with a range between 300-850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750.”
Generally speaking, if your score is 670 or better it will work in your favor when applying for a personal loan. Here’s why:
A Good Score Shows You’re Responsible
Lenders want to know that they’re doing business with responsible consumers. One of the best ways to measure this is by reviewing your credit report and score.
A high credit score shows that you know how to manage your money, such as by making payments on time.
Conversely, a low credit score shows that you’ve had issues in the past, such as late payments, a bankruptcy filing or other financial mistakes.
A Better Interest Rate
There are many details to consider when applying for a personal loan, but it always makes sense to compare lenders based on the interest rate they offer.
Good or excellent credit puts you in position to secure the lowest possible interest rate. Not only does this result in a lower monthly payment, but it can save you thousands of dollars over the course of your loan.
Tip: if your credit score isn’t quite high enough, wait a few months to apply for a personal loan. Increasing your score will help you qualify for a lower rate.
An Unsecured Loan Approval can be Tricky
With a secured loan, there is collateral that the lender can repossess should you default. For instance, when you buy a car, the lender has something they can repossess if you don’t make your payments in accordance with the terms and conditions.
A personal loan is an unsecured loan, meaning there is no collateral. So, if you default, your lender will find it more difficult to recover their money.
This leads to a situation in which personal loan lenders are extremely careful about the applications they approve.
With good credit – as noted above – you show the lender that you’re responsible, so they won’t have any concerns about your ability to repay the loan in full and on time.
If you’re interested in applying for a personal loan, first review your credit report and credit score. If everything is in order, you’re ready to push forward. If not, do your best to repair your score before submitting an application.
Good credit will help you in many ways, and this definitely holds true when applying for a personal loan.