Does getting a loan affect your credit score? | ClearScore GB (2024)

FAQs

Does getting a loan affect your credit score? | ClearScore GB? ›

It adds a hard search to your credit report

A personal loan can affect your credit score in a number of ways⁠—both good and bad. Taking out a personal loan isn't bad for your credit score in and of itself. However, it may affect your overall score for the short term and make it more difficult for you to obtain additional credit before that new loan is paid back.

When you apply for a loan, reputable lenders will check your credit. The higher your score, the more likely you are to get approved, and the lower your interest rate will be. If you have a score less than good (under 670), you likely won't get approved by most lenders.

The specific credit score you need to qualify for a $1,000 loan can vary quite a bit among lenders. Most lenders look for good to excellent credit scores (670 or higher), but there are some that are willing to work with people who have less-than-perfect credit.

Different companies will be looking for different things in potential customers, so while you may be one lender's cup of tea, you may not tick all the boxes for another. We provide a score from between 0-999 and consider a 'good' score to be anywhere between 881 and 960, with 'fair' or average between 721 and 880.

If you're not careful, it can be tempting to rack up more debt rather than focusing solely on paying it off. Why this matters: Although taking out a personal loan can help you consolidate high-interest debt, it can cause you to go deeper into debt if you don't address any bad spending habits.

In general, lenders extend $30,000 loans to borrowers with good to excellent credit, which is typically 670 and higher. But there may be lenders who lend to borrowers with bad credit. If you're having difficulty qualifying, you may consider getting a cosigner or co-borrower to help you get approved for the loan.

Generally, you'll need a good to excellent credit score — 670 or higher — to qualify for a $20,000 loan. The higher your credit score, the better your chances of qualifying for a loan and securing a lower interest rate.

Requirements for a $5,000 loan vary by lender. But in general, you should have at least Fair credit, which is a score of 580 or above. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.

Qualifications for a $40,000 personal loan

Most lenders evaluate the following before making a lending decision: Credit: Your credit score shows how well you have handled past borrowed money. To qualify for a $40,000 loan, you'll typically need a credit score upwards of 670 or a co-signer with good or excellent credit.

Is a 900 credit score possible? ›

Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.

Typically, a desirable credit score for a $25,000 personal loan is around 670 and above, but some lenders work with those who have scores from 580 and up.

SBA 7(a) Express Loans

Usually, lenders will want to see a minimum credit score of 640. Unlike standard 7(a) loans, SBA 7(a) Express loans have a loan limit of $500,000, but they can be approved in a much shorter period of time, making them ideal for businesses that need a quick source of financing.

Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.

A credit score of 999 from Experian is the highest you can get. It usually means you don't have many marks on your credit file and are very likely to be accepted for a loan or credit card.

The ability to successfully manage multiple debts and different credit types tends to benefit your credit scores. Credit scoring systems favor a mixture of installment debt (such as student loans, mortgages, car loans and personal loans) and revolving accounts (credit cards and lines of credit).

Paying off a loan can help reduce your debt-to-income ratio, but if it will also temporarily reduce your credit score, it could be worth keeping the loan if your DTI is low enough as-is.

A personal loan can impact your mortgage application and approval. Like any debt that appears on your credit reports, how you manage a personal loan will impact how lenders view the debt and your creditworthiness.

However, applying for two different types of loans, for example, a student loan and a car loan within a two-week period can count as two separate hard inquiries. Applying for more loans after the timeframe of 14 to 45 days can negatively impact your credit score.