Nearly one in five Americans have a credit score below 600. Those seeking a personal loan with poor credit will have a hard time finding a lender, but there are some out there to consider. In this article, we'll discuss how credit affects your access to capital, list some lenders to consider, and offer advice on how to increase your credit score.

How Does Credit Affect Your Access To Capital?

Your credit history has a tremendous effect on your access to capital. In general, the higher your credit score, the more favorable loan terms and the higher loan amount you can qualify for. The lower your credit score, the less desirable terms you will be offered, if at all. Some lenders take into account your income and other assets when determining creditworthiness, but your credit score will weigh heavily.

Poor credit typically refers to a credit score below 580. 'Fair' credit ranges from 580 to 669, the 'good' range is 670 to 739, 'very good' credit is 740 to 799, and excellent credit is 800 and above. Those who have a credit score below 580 will have the highest origination fees, interest rates, and APR. Some lenders do not lend to those who have poor credit, so finding options will be challenging.

The higher the APR, the more you will pay for the loan. For example, let's say you have poor credit and get a loan for $10K with an APR of 23.783% on a 36-month term. Over those three years, you will pay $3,378.89 in interest alone.

For the same loan with good credit and an APR of 8.683%, the interest you pay will be $1,281.09. APR makes a massive difference in the amount you pay for the loan.

Where Can I Find A Personal Loan With Bad Credit?

The number of lenders that extend credit to people with bad credit is low, but there are still viable options out there. Here are some options to consider if you need a personal loan.

• Avant is one of the more well-known lenders that offers credit to people with poor credit. Borrowers have obtained a personal loan from Avant with only a 550 credit score. Avant offers loans up to $35K with APRs ranging from 9.95% to 35.99%.
• Cash USA is an online lender that offers personal loans up to $10K. They do not have a minimum credit limit listed, but they also do not guarantee a loan. To begin, they require you to be 18, employed for the last 90 days and have a checking account. The APR ranges from 5.99% to 35.99%
• Personalloans.com offers personal loans from $1K to $35K and requires a minimum credit score of 580. The APR ranges from 5.99% to 35.89% and they offer terms up to 72 months.
• Upstart is another online lender that offers personal loans to consolidate debt, refinance a car, and more. They require a 580 credit score and offer loans up to $50K with an APR ranging from 5.31% to 35.99%.

What Should I Do If I Was Denied A Personal Loan?

If you are denied a personal loan, the reason for the denial sheds light on where to begin. Normally, the reason boils down to one of three causes. Your application will likely be denied because you have a high debt-to-income ratio, volatile or inconsistent employment, or a bad credit score due to poor payment history and other factors. Lenders must explain the denial reason, so begin fixing the issue the caused it.

It may be easier said than done, but you will likely need to increase your credit score and start rectifying the issues that are dragging it down. Decrease your personal debt so your debt-to-income ratio balances out. Look for another job to increase your income, find ways to decrease your expenses, re-create your budget, and follow a debt payoff method like the debt snowball or debt avalanche.

How Can I Improve My Credit?

Aside from paying down some of your debt, there are other actions you can take to increase your creditworthiness and your odds at obtaining a personal loan. Here are the steps you can take to increase your credit score.

• Become an authorized user. By becoming an authorized user on someone's account, you can tap into their credit history and transfer it to one of your accounts.
• Keep your accounts open. Once you pay off a credit card or credit line, keep it open the longer you have an account open, the better it looks on your history.
• Apply for a secured loan. A secured loan, even a small one, can help build your credit payment history over time.
• Decrease your credit utilization. This means either paying off debt or increasing your available credit. When you are eligible for a credit card, you can apply for one every few months to increase your available credit (but don't use them).
• Make your payments on time. This has a huge impact on your creditworthiness, even if you only make minimum payments.

Disclaimer: The companies listed in this post have not been vetted by Skip, nor are they endorsed by Skip. This article is for informational purposes only and should not be taken as financial advice.

How Else Can Skip Help? Whether you need assistance navigating funding for your small business — like SBA loans, grants, or other financing options, or guidance with government-related services — like TSA PreCheck or DMV appointments, we’re ready to help. Become a member and skip the red tape.