How your credit score can impact your personal loan application
The required credit score for a personal loan varies, but lenders almost always consider your credit score when deciding whether to offer you a loan. A higher credit score can mean a more trustworthy borrower, while a lower credit score can mean more risk for lenders.
Since lenders also use your credit score to calculate your interest rate and repayment potential across a range of products, improving your credit score can impact not only your ability to qualify for a personal loan but also your general financial health.
Other factors lenders consider
Lenders offering personal loans consider several factors beyond your credit score, including your:
- debt-to-income ratio
- income
- age (lenders typically have minimum age requirements)
These aspects can affect your ability to qualify for a personal loan. While you may not be able to change some of these factors, it’s important to be aware that they can affect your application, what size loan you qualify for and your interest rate.
Tips for building credit
Here are some tips that can help you improve your chances of qualifying for a personal loan.
First, make sure your credit report is free of errors. You can download a free credit report from the three major credit reporting agencies every 12 months. Checking your credit report regularly can help ensure that erroneous entries don’t affect your ability to borrow.
Another way to build your credit is to make minimum debt payments on time. Payment history is a significant factor in your credit score, and paying back your credit cards and loans on time assures lenders that you’re responsible enough to take on more debt.
Another method of building credit is to improve your credit utilization. Credit utilization refers to the percentage of available credit you use compared to your total available credit. Using a smaller amount of your available credit can help improve your credit score, which may make it easier to qualify for a personal loan.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
This article is for general educational purposes. It is not intended to provide financial or tax advice. It also is not intended to describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products. Please consult your tax advisor with any tax questions. Citi is not a tax advisor.