If you are considering taking out a loan, remember that the better you are credit rating , the lower the interest rate on your loan is likely to be. And of course, the stronger your credit, the more likely you are to get approved for a personal loan.
But that doesn’t mean you’re out of luck if you have a bad reputation. Actually there is personal loans for fair credit which are especially suitable for borrowers with an average credit rating. To get the best possible rate with a fair credit history, you can take some additional steps, for example:
But what exactly does “fair creditworthiness” mean? Here’s what you need to know.
Start your path to financial success with a bang
Get free access to select products we use to help us meet our financial goals. These fully proven options can be the solution to help boost your credit score, invest more profitably, create an emergency fund, and more.
By submitting your email address, you agree that we will send you monetary tips along with products and services that we believe may be of interest to you. You can unsubscribe at any time. Please read our Privacy statement as well as Terms and Conditions…
How credit ratings are classified
FICO credit ratings (the most commonly used scoring model) ranges from 300 to 850, but most people don’t have 300 or 850 points. Rather, their results fall somewhere in the middle.
The choice of the best loans for individuals according to The Ascent
Looking for a personal loan but don’t know where to start? Choosing the best personal loans selected by Ascent will help you debunk the myths about offering so you can choose the best one for your needs.
Here’s how these numbers break down, according to the FICO itself:
- 300 to 579 = poor creditworthiness
- 580 to 669 = Fair Credit
- 670 to 739 = good creditworthiness
- 740 to 799 = very good reputation
- 800 to 850 = exceptional loan
Meanwhile, some lenders use VantageScore, an alternative valuation model. Here’s how the different credit ratings break down under this system:
- 300 to 499 = very bad
- 500 to 600 = bad
- 601 to 660 = satisfactory
- 661 to 780 = good
- 781 to 850 = excellent
As you can see, there is a slight difference between the fact that FICO and VantageScore be considered fair merit. FICO gives borrowers a little more leeway, as scores in the top 500 are considered “fair” rather than “bad.” Meanwhile, VantageScore has a slightly lower threshold for “good” versus “fair”.
Ultimately, both scoring models are similar, and if your credit rating falls below 600, you will be considered an applicant with sufficient reputation. This does not mean that you will not be approved for the loan. However, this actually means that to get good interest rate on an individual loan as it would be with someone whose reputation is good, very good, excellent, or exceptional.
How to improve your credit score
If your credit rating is already in the mid-600 area, you may be on the cusp of having good credit instead of fair credit. And it can work for you at the expense of a lower interest rate when borrowing money. If you would like to raise your credit rating into this category, you can do it as follows:
- Timely payment of incoming invoices to improve payment history
- Paying off part of your existing credit card debt to reduce your loan utilization rate
- Checking your credit bug report and fixing those that could degrade your score, such as outstanding debts associated with your account that are not actually yours
The good news is that there are many loan options available for borrowers with a fair credit history. But you also don’t have to get stuck in this category. With time and effort, you can raise your credit rating – and make borrowing more affordable for yourself in the future.