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Last Updated on December 21, 2020
Not everyone likes to take out a personal loan, but sometimes it’s inevitable. You have bills to pay or a medical emergency arises; it’s important that you have the money on hand to take care of your financial worries.
But you can’t just walk into a bank or a lender’s office and expect to get cash just because you ask for it. The key thing lenders look to is your credit score before they consider extending you a line of credit. So what should your target credit score be?
Why Credit Score is Important
Before a creditor decides whether you should be given a loan or not, they have to gather essential information about you beforehand to determine whether you’re capable of paying back the loan. Your credit score is a good reflection of this, which is a reflection of your credit history as well as your current credit situation.
This information is based on whether you have any current credit cards and whether you’re keeping up with the payments, whether you’ve been paying your bills on time and to the full amount, and if you’ve taken out any loans in the past. All of this information gathered together determines your overall credit score. If you’re not sure what your credit score is, there are plenty of online websites that can provide you with a free credit score.
So What’s a Good Number?
Typically, the better you are at maintaining your lines of credit, the higher your number will be and a higher number means that creditors will consider you less of a risk on paying back a personal loan. Defaulting on payments, however, can reduce your score and make it less likely for you to get a loan. In these cases, lenders will grant loans that have higher interest rates or loans for smaller amounts of money.
However, errors do occur. It’s a good idea to check your credit score every twelve months to ensure that the numbers are accurate. Any discrepancies should be raised over the phone, by mail or online. You don’t want your chances of getting a loan to be ruined by a computational error.
Minimum Credit Score
With all that’s been said, to qualify for a personal loan, your credit score must be between 580 and 600. This is just a generalized number, and it’s best to ask what the minimum score requirement is from each lender. That way you’ll know beforehand and won’t waste your time applying for a loan you don’t even qualify for. Another reason to inquire before you apply is that every time you apply for a loan, an inquiry is generated that has a negative impact on your credit score. If you’re not careful, these can add up over time and render your credit score too low.
Take the time to examine each lender you’re interested in getting a loan from to see what’s right for you and won’t ruin your credit score. Some lenders may even offer assistance with helpful methods to increase your credit score.
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