How To Get a Loan With a 600 Credit Score

A 600 credit score falls in the “fair” category and is considered below average for U.S. consumers, according to FICO. You may find it more difficult to get approved for a personal loan if you have a 600 score — especially if you apply with banks and credit unions. However, some lenders will approve borrowers with fair, and even bad, credit.

Over the past two decades, finance companies specializing in online personal loans have gradually gained a significant market share by catering to borrowers with credit challenges. In fact, Credible works with at least nine lenders that will consider applications with a 600 credit score. But since plenty of lenders won't, it's important to be strategic about the lender you choose and put your best foot forward. Here's how.

1. Confirm your 600 credit score

Before applying for a loan, take stock of your credit situation. Start by checking your credit reports with the three main credit bureaus: Experian, Equifax, and TransUnion. You can get free weekly reports from all three at AnnualCreditReport.com. If you find a mistake, file a dispute with the bureau providing the information. 

Next, check your credit scores. FICO is the main credit scoring model in the U.S., but VantageScore is gaining popularity. Lenders may check either score tied to any of the three credit reporting bureaus, so it's good to check them all. While some companies charge you to view your credit scores, others like these include credit scores for free with their memberships:

• Experian offers free FICO scores from Experian
• MyFico offers free FICO scores from Equifax
• Discover offers free FICO scores from TransUnion
• OneMain Financial offers free VantageScores from Experian
• Equifax offers free VantageScores from Equifax
• Credible offers free VantageScores from TransUnion

2. Figure out how much you need to borrow

The next step is to figure out how much you need to borrow. Brainstorm how you plan to use the personal loan and estimate the costs. For example, if you plan to pay off two credit cards and a medical bill, look up the outstanding balances and add them together. Borrowing too little can leave you unable to accomplish your goal while borrowing too much can lead to unnecessary debt and borrowing costs.

3. Review your budget for the monthly payment

Personal loans require you to repay the amount you borrow through fixed payments over a set number of months. Before applying, review your budget to see how much discretionary income you have and how much you're willing to put toward a monthly loan payment. Identify your target monthly payment as well as the maximum you're willing to pay per month. Having these numbers on hand can prevent you from overcommitting as you shop for a loan.

4. Gather important documents

Personal loan lenders typically require a few documents during the application process, including:

• Proof of identity: A copy of your driver's license or Social Security card
• Proof of income: Pay stubs, W-2s and 1099s, tax returns, or bank statements
• Proof of residence: Utility bill, rental agreement, mortgage statement, home or auto insurance, bank or credit card statement, voter registration card, or property tax receipt

You can avoid delays during the loan origination process by getting these ready in advance.

5. Research lenders

Now you're ready to start shopping around. As you do, it's important to know that personal loan lenders vary greatly in their loan offerings and eligibility requirements.

“If someone has a credit score of 600, they should look for lenders who specifically work with those who have 'fair' credit. They are most likely to offer fair terms and agreements,” says Ryan Duitch, CEO of Arro Finance, a credit card for people with low or no credit scores.

You can find good fits by checking the eligibility requirements of lenders to see if they mention a minimum credit score or use terms like “helping underserved communities.” Fair credit lenders also tend to have lower maximum loan limits and higher maximum APRs (around 36%) than lenders that target borrowers with higher credit scores. Additionally, fair-credit lenders tend to be financial companies and fintechs, rather than banks and credit unions.

“Be careful with lenders that advertise 'bad credit' loans. Sometimes, less trustworthy companies target borrowers with lower scores,” says Joseph Camberato, CEO of National Business Capital. Make sure the loan's APR is clearly displayed and pass on a lender that employs pressure tactics.

The goal in this step is to make a list of at least three lenders that look like they could be a good fit for your situation. For example, if you have a 600 credit score and are looking for a $10,000 loan, Upstart could be a good lender to add to your list. It considers applicants with credit scores below 600 and offers loan amounts from $1,000 to $50,000.

6. Get prequalified

Once you have a shortlist of at least three lenders, visit each lender's website and go through the prequalification process or use a personal loans marketplace to prequalify with multiple lenders at once. Most lenders allow you to check if you prequalify within a few minutes without hurting your credit.

During the process, lenders will collect basic information about you, the loan you want, and your credit (through a soft credit check). If you prequalify, the lender will present you with an estimate of the loan you may get.

If you're struggling to prequalify, consider reducing your debt-to-income ratio (DTI) by paying down balances. High balances could be contributing to a high debt-to-income ratio. If you can pay some balances down or off, you could lower your current monthly payments and may have an easier time getting approved for a new loan.

7. Compare quotes

To find a competitive deal, compare the quotes you received side by side. Look at APRs, origination fees, monthly payments, total interest costs, repayment terms, and loan amounts. Rates are a good place to start, but make sure you can afford the monthly payment — a higher rate on a longer-term loan might actually have a lower monthly payment. “Being able to repay your loan is crucial in keeping your credit score healthy,” says Duitch.

Use a personal loan calculator to test out different interest rate, loan amount, and repayment term combinations. Consider making a chart like the one below so you can see the pros and cons of different loans at a glance.

Example comparison of personal loan quotes

Target loan amount: $5,000

Target monthly payment amount: $200

Maximum monthly payment limit: $225

In this scenario, the first quote has the lowest overall cost and APR but doesn't provide a large enough loan amount. Quote three has the lowest monthly payment but the overall cost is significantly higher than the other options. Quote two looks to be the best route. While the monthly payment is a bit over the target, it's under the maximum limit and provides the desired loan amount with a competitive overall cost.

8. Select a lender and apply

Once you find the best loan for your situation, go back to the lender's website or loan marketplace and accept the quote. From there, you'll complete the full loan application. Lenders will dig deeper into your income, expenses, employment, and credit as part of their underwriting process. Most perform a hard credit inquiry at this stage that may cause your credit score to drop by up to five points. Keep in mind that the interest rate and terms of the loan offer could be different from the prequalified quote.

9. Submit the necessary documents

As the lender reviews your application, it may ask for documentation to confirm your income and housing status. However, the process for submissions can vary by lender. Some may ask you to send pictures or scans of hard documents, while others may offer more advanced features like bank syncing. The bottom line is lenders will need to do their due diligence to ensure everything you've submitted is accurate.

10. Accept the loan and start making payments

If all goes well and you're approved for the loan, the lender should send you a loan contract to review and sign. In many cases, contracts are electronic and sent through secure portals. Once you receive it, review the terms carefully to ensure everything works for you. If it does, sign and submit it. The lender will then send the loan funds to you and your repayment schedule will begin.

How to raise your credit score

If you shop around but don't find a suitable personal loan or are denied a personal loan, work on improving your credit score. Here are some steps you can take:

• Make timely payments: Make all of your credit payments on time. Payment history accounts for 35% of your FICO credit score, the largest factor. Late payments count against you and stay on your record for 7 years.
• Keep credit utilization low: If you have revolving credit lines like credit cards, keep the balances as low as possible. Aim for no greater than 30% credit utilization. Credit utilization is a component of the “amounts owed” factor, which makes up 30% of your credit score.
• Limit new credit: Be mindful about the credit accounts you open, as they typically require hard credit inquiries and shorten your average credit account age, both of which can hurt your score. New credit and length of credit history contribute 10% and 15% to your score, respectively.
• Add bills to your credit report: Experian Boost is one example of a free program that lets you add bills and rent payments to your Experian credit report. You can self-report rent payments for free to all 3 credit bureaus with a service like Self. Research these and other rent- and bill-reporting services to find the best for you.
• Check for drop-off dates: If you have negative marks, check the dates they'll drop off your reports. Most items only stay on credit reports for 7 years. If negative marks are going to drop off soon, score improvements will likely follow.
• Become an authorized user: If you have a close friend or family member willing to make you an authorized user on their credit card, you could see a boost in your own score within a month — as long as they make on-time monthly payments and maintain a low or zero balance. High balances and late payment activity on their part could impact your credit report and score.

Camberato recommends you start by trying to figure out what's pulling your score down. “Is it high balances, missed payments, or something else? This will give you a clear starting point.” He adds that you often can't improve your credit score overnight, but if you stick with it, you'll see real progress over time.