What is the Minimum Credit Score for an Installment Loan?

Installment loans can be super helpful if you need funds to cover an upcoming expense. Think of things like a car repair, unanticipated medical expenses, summer child care, or even a quick weekend getaway with a deal that you just can’t pass up. When you don’t have a rainy-day fund or extra cash lying around, an installment loan can quickly come to the rescue.

But what if your credit score is less than perfect? Is there a minimum credit score necessary for approval for an installment loan? In this article, we’ll explain why your credit score is so important, the typical requirements for an installment loan, and the usual minimum credit score requirements that lenders consider.

Typical Minimum Credit Score Requirements

Before we share the typical minimum credit score for an installment loan, let’s align on the significance of your credit score in the first place. Simply stated, if you’ve ever borrowed money from a bank or a lender, rented or leased a home (or have a mortgage), or financed a car, you have a credit score.

Your credit score is a number between 300 and 850. The higher your number, the better your credit application tends to look to lenders. Here’s a general breakdown:

• 300–579: Poor
• 580–669: Fair
• 670–739: Good
• 740–799: Very Good
• 800–850: Excellent

So, what’s the minimum score needed for an installment loan? It depends on the lender, but many lenders start considering applications at around 550. Some lenders may work with lower scores, especially if you have other strong points in your application. Others might require a higher score for larger loan amounts or for longer repayment terms.

Besides your credit score, here are a few other things lenders usually consider:

• Your income: Can you comfortably make the monthly payments?
• Employment status: Are you currently working or have a steady source of income?
• Debt-to-income ratio: How much of your income already goes toward other bills or debt
  
  
• Loan purpose: Some lenders want to know what you’ll use the funds for.
• Payment history: Have you paid previous loans or bills on time?

All of these details help a lender decide if you’re a good candidate for a loan—even if your credit score isn’t perfect.

Options for Borrowers with Lower Credit Scores

So, what are your borrowing options if your credit score falls into that poor or fair range? First, we’d be remiss if we didn’t start by suggesting that you take a look at your overall financial situation. Do you have a budget? Are you putting money into savings every month? Are you making all of your minimum monthly payments on time?

While installment loans are a great way to get the money that you need, it does mean that you will be on the hook to follow through with the terms in your loan agreement. So, if money is tight, it’s often best to evaluate your budget before taking out a loan. That said, here are the best options for those with low credit scores:

• Subprime lenders and credit unions: Some lenders specifically work with borrowers who have lower credit scores. Credit unions, in particular, are known to be more flexible than traditional banks. It’s worth checking their rates and requirements if you're a member. Other personal installment loan providers, such as Credit Central, focus on offering credit to subprime consumers to offer a second chance and to help them rebuild their credit histories.
• Secured installment loans: These types of loans require you to offer something as collateral, like a car or a savings account. Because the lender has something to back the loan, they may be more willing to approve someone with a lower score.
• Co-signers: If you have a trusted friend or family member with good credit, you can ask him or her to co-sign the loan with you. This can help increase your chances of approval and may even get you better loan terms. Just remember, they’ll be responsible for the loan too if you can’t pay.
• Smaller loan amounts or higher interest rates: If you’re okay with borrowing less, some lenders might be willing to approve you, even with a lower score. Just know that the interest rate might be higher than someone with a better credit history. Always read the fine print and make sure you understand the total cost of the loan.

Tips to Improve Approval Odds

If you’re feeling dismayed because your credit score isn’t where you want it to be, we have some good news for you. There are a few practical steps you can take that may not only improve your odds of getting approved for an installment loan, but can also help improve your overall financial picture.

Right now, the average credit score in the U.S. is 715, so that’s a solid number to aim for. Even if you’re not there yet, small steps can move you in the right direction. Here are a few things you can do to help boost your chances:

• Pay down existing debt: The less debt you have, the better you tend to look to lenders. Start with credit cards or loans with the highest interest rates and try to lower your balances. Even small progress can help your credit score.
• Review and correct your credit report: Mistakes happen. Pull your free credit report from all three major bureaus and check for anything that looks off. Disputing an error could give your score a bump.
• Show proof of stable income: If you’re working consistently or have a regular source of income, make sure the lender knows that. Pay stubs, tax forms, or bank statements can help show that you’re able to handle monthly payments.
• Consider prequalification tools: Some lenders offer online prequalification, which gives you an idea of whether you’d qualify, without a hard hit to your credit. It’s a smart way to shop around without affecting your score.
• Use various credit types: Having a mix of credit types, such as credit cards and installment loans, on your credit history can show lenders that you can responsibly handle various credit products.

Improving your credit and preparing ahead of time can go a long way. Even if you don’t get approved today, these steps can set you up for better options down the road.

Credit Scores, Loans, and Moving Forward

Getting an installment loan when your credit score isn’t where you want it to be can feel intimidating, but it’s far from impossible. In this article, we explained what a credit score is, broke down the typical minimum score lenders look for (often around 550), and shared a few practical options for borrowers with lower scores, like secured loans, co-signers, and working with subprime lenders or credit unions.

We also walked through simple ways to improve your chances, from paying down existing debt to using prequalification tools. And remember, the average credit score in the U.S. is 715, so you’re not alone if you’re working toward that.

At Credit Central, we believe that everyone should have the chance to get the credit he or she need. While we do take your credit history into account, it’s still possible to get a loan from us even with a damaged credit score. We offer installment loans with fixed payments, providing a clear path to paying back what you borrow without surprises.

If you’re ready to take the next step, stop by a Credit Central branch near you or apply online.