Can You Get a Personal Loan With Fair Credit?

Through December 31, 2022, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.

A personal loan can help you with a whole range of financial challenges. If you need cash to cover a large expense or a medical bill, or to consolidate your credit card balances at a lower interest rate, for example, a personal loan may be the answer. A personal loan is an installment loan, paid back in fixed monthly payments, that doesn’t require any collateral such as your home or car to secure.

You don’t need perfect credit to get a personal loan. But if your credit falls into the “fair” category, you may find fewer loan options and have a more difficult time getting favorable interest rates and terms than a borrower with a high credit score would. If you’re considering a personal loan and your credit is in the “fair” zone, read on for help with evaluating your situation, finding your best options and possibly even improving your score.

What Is Considered Fair Credit?

A FICO® score of 580 to 669 is considered fair. FICO® scores range from 300 to 850 and fall into the following five categories:

RatingCredit ScoreVery poor300-579Fair580-669Good670-739Very good740-799Exceptional800-850

Your FICO® scores are based on information in your credit reports maintained by the three major credit reporting agencies—Experian, TransUnion and Equifax. In calculating your credit score, FICO® considers these five factors:

Payment history: How consistent you’ve been paying your bills on time is the most important factor in maintaining a good credit score. This accounts for 35% of your FICO® Score☉

, so even one missed or late payment can have a big effect.
Amounts owed: Add up all of your credit card balances and divide that number by the sum of all your available credit card limits to find your credit utilization. This factor, along with how much progress you’ve made paying down any loans you have, accounts for 30% of your credit score. The lower your credit utilization, and the closer you are to paying off your cards, the better.
Length of credit history: 15% of your credit score is based on how long you’ve held your credit card and loan accounts. This factor also considers the average age of all your accounts.
Credit mix: Seasoned credit users manage a variety of credit products: loans, credit cards, lines of credit and so on. The diversity of your credit portfolio accounts for 10% of your FICO® Score.
New credit: The final 10% of your score is based on how many credit accounts you’ve opened recently and how many hard inquiries have been made on your credit report. A flurry of new credit applications can increase how risky you appear to lenders.

When you apply for credit, lenders use your credit score to help assess the risk involved in lending you money. A high credit score indicates that you have experience managing credit and that you’ve been successful at repaying debt. A fair credit score suggests you might be relatively new at using credit or that you’ve experienced some setbacks in the past. Because this translates into a higher perceived risk for lenders, the lowest interest rates and best loan terms may be out of reach to borrowers with fair credit. If your credit falls into this range, one of your main challenges will be finding the right lender and loan.

How to Get a Personal Loan With Fair Credit

There are straightforward steps to applying for a personal loan. The first step is to evaluate your credit situation. Your credit reports are available for free through AnnualCreditReport.com. You can also see your credit score and download your credit report from Experian for free at any time. Review your score information and check your credit report for any inaccuracies and any factors that may be holding back your scores.

Shop for the Right Fit

Finding the right lender is key. You can start by checking with a bank or credit union you already do business with. Another helpful resource is Experian CreditMatch™, which you can use to get a list of potential lenders matched to your credit profile. Using a platform like CreditMatch can help you sift through the available options to find lenders that are more likely to work for you. This is especially important if your credit is less than perfect because the loan rates and terms you’re likely to receive can vary greatly. Shopping multiple options helps you find the best possible loan for your circumstances.

An additional note: If your search leads you to payday lenders or title loan lenders, beware. Sky-high interest rates and difficult payment terms can easily trap borrowers in a cycle of debt and cause long-lasting financial harm.

Get Prequalified or Preapproved

Once you’ve narrowed your options down, take the next step. Having a lender (or a few lenders) prequalify or preapprove your loan will give you more detailed information—and a better idea of whether your application will actually be approved.

Consider a Cosigner

If you have difficulty getting your loan application approved, ask how you might improve your chances. One possibility is to find a friend or family member with good credit who would be willing to cosign your loan. As a cosigner, they are putting their credit on the line to vouch for you, which can make it possible for you to get approved for better loans. They’re also pledging responsibility for the loan if you can’t pay it, so this is not an option to be taken lightly.

Before asking someone to cosign a loan for you, make sure they understand how it could affect their credit, and come to an understanding about what to do if you’re unable to pay.

How to Improve a Fair Credit Score

If you have time before you need to apply for a loan, you can try to improve your credit scores. There’s no magic method for doing so, but there are a few steps you can take that may nudge your credit score toward friendlier territory:

Address inaccuracies. If you find incorrect information in your credit report, dispute it.
Pay down debt. Reducing the balances on your credit cards will help raise your score.
Pay bills on time. A single late payment can stay on your credit report for seven years, so it’s important not to miss any.
Get credit for on-time phone, utility and streaming bills. Experian Boost™†

helps you factor your on-time phone, utility and streaming service payments into your credit history, which may instantly raise your score.
Be conservative with new credit. Don’t open new accounts and until it’s time to apply for your loan again.

Turning a fair credit score into a good one isn’t a fast fix. It can take months—or longer. But it may also spell the difference between a costly loan and one that genuinely helps your finances. If you have the time to work on your credit score and apply for a personal loan later, it may be to your benefit.

Putting Your Best Foot Forward

Securing the right personal loan with fair credit can be a challenge, but it can also help put you on the road to better financial health—and inspire you to take control of your credit. Going forward, keeping an eye on your credit with tools like Experian’s free credit monitoring can help you correct course when things are trending the wrong way and track your progress as your credit improves.