Can You Get a Loan with a Low Credit Score?

Navigating the world of borrowing money with bad credit can range from daunting to downright frustrating. Some lenders may outright deny your application because they believe your credit score correlates to a higher risk of you defaulting on your loans. You might even start to wonder: Can you even get a loan with a low credit score?

The short answer is, “Yes.” It is possible to get approved for loans with low credit, but it is a matter of doing your research and finding the loans most likely to fit your circumstances before applying. Not all lenders and lines of credit are open to borrowers with poor credit, and applying for these is a waste of time, a source of frustration and a potential way to get your credit score dinged even more for repeated hard inquiries.

Keep reading to learn more about what to expect when you’re trying to get a loan with a low credit score — that is, a score falling below about 580 on the FICO scale of 300 to 850.

What to Know About Bad-Credit Loans

Besides a higher likelihood of being turned down on loan applications, the biggest downside to trying to borrow money with a bad credit score is the higher interest rates you’ll face. Lenders see bad credit as an indicator of increased default risk, so they increase interest charges to offset this risk.

Here’s how this looks in action. Say two borrowers, Alex and Frankie, are each hoping to consolidate their credit card debts with a personal loan. The reasoning here is that interest rates on personal loans tend to be lower than credit cards, meaning borrowers can use them to simply the repayment process and reduce the amount of interest they end up paying.

Alex has an excellent credit score of around 730; Frankie has a poor credit score of 579 due to some past missed payments and high credit utilization. Alex will most likely be able to secure interest rates between 10 and 13 percent — which means there’s a good chance he’ll be able to save money by consolidating. Frankie, on the other hand, can expect to encounter interest rates higher than 20 percent, even reaching the low thirties.

Such is the nature of getting a debt consolidation loan for bad credit. Borrowers with bad credit often end up paying hundreds or thousands of dollars more across the lifetime of the loan due to those heightened interest charges.

Tips for Improving Your Credit Score

While there’s not necessarily a quick and easy way to raise your credit score on short notice, there are actions you can take to build your score over time ahead of borrowing money.

Here are a few tips from NerdWallet on how to improve your credit score ASAP:

  • Make payments more than once per month to minimize how much of your available credit you’re currently using.
  • Ask creditors to raise your credit limits on existing accounts (but avoid spending more as a result).
  • Access your free credit reports and look for errors; dispute any you find.
  • Avoid closing credit accounts you no longer use, as this will maximize the average age of your accounts.
  • Come up with a system that helps you pay your bills on time every month. Address any outstanding late or missing payments.

Can you get a loan with poor credit? Usually yes. Will it be more difficult to get approved and cost you more in interest charges? Also yes, which is why it’s worth doing everything you can to raise your credit score before you apply.