Young woman sitting and looking at phone about personal loans for bad credit
Young woman sitting and looking at phone about personal loans for bad credit

Personal loans for bad credit

If you’ve struggled with bad credit, the good news is that there are viable loan options.

Traditional lenders use your credit score to determine personal loan decisions and rates. A bad credit score is generally considered to be below 600, while scores in the 600s are considered fair, in the 700s are seen as desirable or "good," and above 800 as excellent. Upstart looks beyond your credit score when it comes to personal loans, credit card debt consolidations, and more.

You have ample opportunity to improve a bad credit score by stringing together even a few months of good habits.

What is bad credit?

Bad credit is a function of your past behavior when it comes to paying back loans, managing different lines of credit, and keeping your credit usage at a reasonable level as defined by credit reporting agencies. Traditional lenders generally view a credit score below 600 to constitute “bad credit.”

Failure to make minimum payments in the past—or a habit of using too much credit—can damage your credit score. Bad credit can then have the effect of harming your future lending opportunities.

A history of making payments on time, using only a modest share of your available credit, and having a variety of loans outstanding can help raise your bad credit score.

Maintaining a solid credit score can help you lock in reasonable interest rates and access to more lending opportunities. But remember, you’re more than your credit score and it alone doesn’t define you.

This content is general in nature and is provided for informational purposes only. Upstart is not a financial advisor and does not offer financial planning services. This content may contain references to products and services offered through Upstart’s credit marketplace.

We’ve helped more than 2.5 million borrowers²

A smiling man in a blue shirt is happy about a personal loan for bad credit

John got the personal loan for bad credit that he needed in June 2022³

"Fast, easy and super user friendly! Thank you for the approval despite my bad credit. Will remember this for the rest of my life. Thank you for saving the day!"

Images are not actual customers, but their stories are real

What makes up a bad credit score?

Your credit score is comprised of five attributes:

- Payment history (more on-time payments is better)
- Amounts owed (less is better)
- Length of credit history (longer is better)
- Credit mix (maintain a variety of loan types)
- New credit (less hard inquiries or new account openings is better)

Your payment history is the most heavily weighted component of your credit score, as it drives about 35%. Also, owing only small amounts of money—or having low usage numbers—will help maximize your score.

Again, having bad credit won’t necessarily disqualify you from taking out a personal loan. But you should keep the above areas in mind to help you boost your credit score going forward.

What makes up a bad credit score?

Older man holding a phone and reading about loans for bad credit

What makes up a bad credit score?

Your credit score is comprised of five attributes:

- Payment history (more on-time payments is better)
- Amounts owed (less is better)
- Length of credit history (longer is better)
- Credit mix (maintain a variety of loan types)
- New credit (less hard inquiries or new account openings is better)

Your payment history is the most heavily weighted component of your credit score, as it drives about 35%. Also, owing only small amounts of money—or having low usage numbers—will help maximize your score.

Again, having bad credit won’t necessarily disqualify you from taking out a personal loan. But you should keep the above areas in mind to help you boost your credit score going forward.

What makes up a bad credit score?

Older man holding a phone and reading about loans for bad credit

Personal loan for bad credit FAQs

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    What sort of personal loans are available to someone with bad credit?

    If your credit score isn’t particularly high, there is still hope for a personal loan. As a point of good practice, always be sure to thoroughly understand any loan terms before you sign on the dotted line.

    Personal loans are typically “unsecured” loans, which means they’re not backed by collateral. While secured loans are typically backed by a physical asset like a house or a car, unsecured loans are only backed by the promise of the borrower.

    With a lower credit score, you may struggle to be approved by "traditional" lenders. However, lending marketplaces like Upstart consider more than your credit score and make it easy to check your rate for a personal loan. If you borrow through Upstart, you’ll benefit from:

    - Flexible loan amounts ($1,000 to $50,000⁴)
    - Fixed interest rates (ranging from 6.5% to 35.99%⁵, depending on your circumstances)
    - No prepayment fees.

    Upstart looks beyond a borrower's credit score by using over 1,000 data points to paint a more complete picture of their financial and life situation, giving qualified borrowers the access to borrowing they need and deserve.

    You can see if you're able to get approved, and what your rate would be, within minutes. Most importantly, there is no impact to your credit score to check your rate!

    If you're considering a personal loan, it's always good to know your options, but be sure to pay attention to interest rates, fees, or other penalties you may face with less-than-stellar credit. However, you shouldn't feel pressure to take on additional debt unless you need the money.

    An improved credit score is a nice byproduct of taking out a personal loan and paying it back on time. Remember: amounts borrowed will need to be paid back, and interest expense is a critical component to be aware of—especially over long periods of time.
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    When should I take out a personal loan?

    There are a lot of times when taking a personal loan could make sense, like if:

    - You have high-interest credit card debt or would like to consolidate your credit accounts.
    - You need the money for an unexpected expense or emergency.

    Remember that loans still accrue interest and fees, and you’ll also need to pay the loan back with money earned in the future. If you have an immediate and necessary expense to meet, a personal loan might make sense if you don’t have access to the money from other avenues.

    Still, having bad credit won’t be a barrier to securing a personal loan from the right lender.
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    How should I choose a bad-credit personal loan?

    Reviewing all your options is key when it comes to taking out a personal loan with bad credit.

    Among the factors you’ll want to consider:

    - Lender’s minimum credit score. Some bad-credit lenders will have a minimum score required before allowing loans to be approved.

    - Your debt-to-income ratio. You may be allowed to borrow a certain amount based on your current income. This will vary by lender.

    - Your APY. Your APY, or Annual Percentage Yield, is the effective interest rate you pay over a given year; this includes any origination fees.

    - Your monthly payments. Seeing your monthly payments in dollars can help you manage your monthly cash flow and stick to a budget.

    - Other loan factors. If a specific bad-credit loan can help in rebuilding your credit, that might sway you in one direction over another. Other fees, like prepayment penalties, can affect you if you decide to pay off your loan early.

See if Upstart is right for you

Personal loans are accessible to those with bad credit, but you’ll need to do the work to understand exactly what you’re signing up for. If you do decide a personal loan is right for you, Upstart is available to help you navigate your path forward.

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Won't affect your credit score¹

1. When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.

2. As of 9/30/2022, across the entire Upstart marketplace.

3. Your loan amount and terms will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.

4. Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($2,100), MA ($7,000)

5. The full range of available rates varies by state. The average 5-year loan offered across all lenders using the Upstart platform will have an APR of 26.57% and 60 monthly payments of $27.29 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $16,376 including a $695 origination fee. APR is calculated based on 5-year rates offered in September 2022. There is no downpayment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.