Ask Credit Karma: How Do I Get a Loan With My Credit Score?

Ask Credit Karma: How Do I Get a Loan With My Credit Score?

If you are looking to buy a home, finance your business, pay off a car, or go on a mega-shopping spree (just kidding, that’s not what loans are for!), qualifying for a great loan requires a polished credit score and credit report. Today, we satisfy LearnVesters’ curiosity surrounding the relationship between your credit score and loans.

What is the target credit score range to be able to get a loan?
--Sophia T.

Qualifying for a loan as well as locking in a good interest rate has drum-tight lending standards nowadays. If you have below 620 credit score, you’re considered a subprime (aka RISKY) borrower and lenders are averse to lend to you. Between 620 and 720, you’ll likely qualify for a loan  but with steep interest rates. A 760+ credit score is your big ticket to the best loan options and premium interest rates, such as the historically low 4.5% mortgage rates available now. Your credit score is crucial in lending decisions because the difference between having a 620 and 800 credit score can be a significant enough difference in interest rates to save/cost you thousands of dollars over the life of a mortgage or loan.

How is it I can get horrible loan rates with a credit score of almost 800?
--Mary B.

Typically, a near-800 credit score accesses the best interest rates, so it’s time to do a little digging. Start by checking your credit report (free at AnnualCreditReport.com). Scan through every item of your credit report to see if there are errors, such as erroneous late payments, that lenders may be mistakenly taking into account when making a lending decision. Dispute any issues to clear up your credit. Lenders pull different credit reports from different credit bureaus, so you may have to check your credit report at all three major credit bureaus.

Here’s a glance at some average interest rates for loans:

Wells Fargo personal loan 16.45%-29.20%
Lending Club personal loan 7.93%
30 year fixed mortgage 4.35%
48 month new car loan 6.15%
Stafford school loan 6.80%

*Some loan rates provided by Bankrate.com

Excellent credit consumers are offered these rates or lower. This helps you gauge whether or not you are receiving unusually “horrible” loan rates for your credit score range.

Have a credit conundrum of your own? Tweet your stumpers to @LearnVest for our next LearnVest-exclusive Q&A, and stop by our Credit Advice Center for a look at what other credit-conscious consumers are chatting about.

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