Key takeaways

  • Shopping around can help you find lenders catering to subprime borrowers.
  • Consider using a co-signer or applying for a secured loan to increase your approval odds.
  • If you improve your credit score before applying, you may qualify for more attractive loan terms.

Personal loans can be a helpful way to cover the cost of major expenses. When applying, having a FICO score between 670 and 850 generally qualifies you for competitive interest rates and loan terms.

But even with a 550 credit score, it is still possible to get a loan. While it’s often more difficult to get approval with a score this low, there are lenders specializing in loans to individuals with bad credit. However, you will likely face higher annual percentage rates (APRs) and less-favorable terms than borrowers with better credit.

Can you get a personal loan with a 550 credit score?

Lenders use your credit score as a way to assess risk. Lower scores may mean missed payments or defaults in your credit history.

Most lenders require a minimum credit score of between 600 and 650, but some lenders specialize in bad credit personal loans. It may be more challenging to find a lender willing to work with you, but obtaining a loan with a 550 credit score is possible.

“This type of loan is a specialty for a very few lenders who have forceful collection arms and a capacity for risk,” says Michael Sullivan, director of education for the non-profit credit counseling agency Take Charge America. “Any lender dealing in such loans expects many defaults and losses, and acts accordingly. The result is that a personal loan is almost always a bad deal for the consumer with poor credit.”

Having a credit score of 550 might affect the terms you’re offered in the following ways:

  • A smaller loan amount: Lenders think a low credit score means a borrower is likelier to fail to repay a loan. So they may limit the amount you can borrow to less than the maximum amount they offer borrowers with higher scores to minimize their potential losses.
  • A higher interest rate: Your credit score is the top factor determining your interest rates with most lenders. Charging a higher APR is another way lenders minimize possible losses.
  • A shorter maximum term: The longer a loan repayment term stretches, the more chances there are for the borrower to hit hard times. With a low credit score, you may not qualify for a lender’s maximum terms. This presents a dilemma for some borrowers. A shorter repayment term also means higher monthly payments that could be harder to keep up with.

What kind of credit score is 550?

A 550 FICO credit score is considered deep subprime, according to the Consumer Financial Protection Bureau. The Fair Isaac Corporation (FICO), which is one of the most widely used credit scoring methods, categorizes credit scores of 579 or lower as poor.

How bad credit affects rates

Lenders see a lower score as a sign of risk. So to offset loss from potential missed payments or a defaulted loan, lenders tend to charge more on interest if the borrower has bad credit. Average loan interest rates reflect this practice:

Credit score Average loan interest rate
300–629 28.50%-32.00%
630–689 17.80%-19.90%
690–719 13.50%-15.50%
720–850 10.73%-12.50%

How to get a personal loan with a 550 credit score

Obtaining a 550 credit score loan will be more challenging. It’s important to be thoroughly prepared to navigate the process.

Do your research

Among the best-known lenders offering bad credit loans are:

  • Avant: Avant lends to those with credit scores as low as 550. It offers loan terms as short as one year, which could make it a good alternative to riskier types of short-term loans.
  • Upstart: Upstart sets no minimum credit score requirement. Instead, its approval system looks at your income and education level, among other factors. Upstart was the 2024 Bankrate Awards pick for best bad-credit lender.

Many more lenders cater to those with lower credit scores, but make sure you filter out the disreputable ones before applying. View reviews on third-party platforms like Trustpilot to feel out a lender’s reputation and look for patterns in customers’ experiences.

Also, be wary of high rates and short terms which could make it difficult to keep up with payments. Getting caught in a cycle of growing debt and defaults could seriously hurt your finances.

Shop around and prequalify

Eligibility guidelines typically vary by lender. It’s important to research multiple lenders to find out which lender is best for you.

Some lender websites feature a prequalification tool that allows you to view potential loan offers, including monthly payments and rates, without hurting your credit score. If you decide to formally apply, the lender may conduct a hard credit check that could ding your credit score by a few points.

Consider secured loans

This type of loan is secured by collateral, like a house, a car or some other item of value. You’ll generally get better loan terms, but you risk your asset if you default on the loan.

Try credit unions and local banks

“Often, having an existing relationship with a community institution is helpful, as they usually have more flexibility and may be willing to take a holistic look at your finances and evaluate your application based on more than just your credit score,” says debt attorney Leslie Tayne, founder of Tayne Law Group.

Find a co-signer

Consider finding a co-signer with a solid credit score if you’re unable to qualify on your own. “Many lenders will provide loans if they are guaranteed by someone with good credit,” says Sullivan.

Alternatives to personal loans

If you cannot get a personal loan or the interest rates you’re offered are too steep, consider personal loan alternatives.

  • Improve your credit: Not in a rush to get the money? Consider spending some time working on boosting your credit score to increase the likelihood of qualifying for loans with more favorable terms.
  • Personal loan from a friend or relative: Identify someone with whom you have a good relationship and feel comfortable sharing personal financial details. Be sure to get the agreement, including the monthly payment amount, in writing to avoid any confusion in the future.
  • 401(k) loan: Consider borrowing from your retirement fund if you have an employer-sponsored 401(k) plan. These types of loans don’t require a credit check. “They also come with low interest, which you pay back to yourself anyway,” Tayne says. However, be aware that if you leave your job or are fired, you must repay your 401(k) loan by the next federal tax day.

How to improve your credit score

Several steps can help improve your financial profile. Some of the steps work more quickly than others. So, try several, and start well before you need the personal loan.

Check your credit report for errors

Start by making sure the raw information on your credit report that is used to calculate credit scores is correct. Federal law entitles you to a free copy of your credit report from the major credit bureaus weekly.

Visit AnnualCreditReport.com to get your copies and review all the contents of the reports “If you detect any errors, follow the directions on each agency’s website to correct the issues,” says Freddie Huynh, CEO at Stealth FinTech Startup and credit risk expert.

Pay bills on time

Payment history accounts for 35 percent of your credit score. So, if you have any open past-due accounts, bring them current and continue making timely payments to avoid continued adverse credit reporting.

Reduce debt balances

The amount you owe creditors is another major component of your credit health. It accounts for 30 percent of your credit score. If possible, reduce your revolving debt balance to under 30 percent. That will improve your credit utilization and possibly increase your credit score. For example, if your credit limit is $1,000, try to keep your outstanding balances under $330.

Maintain old credit cards

The length of your credit history accounts for 15 percent of your credit score. Credit age is the amount of time you’ve had accounts open. It’s best not to close old credit accounts even after the balance is paid off, as this can reduce your overall length of credit history.

Open a secured credit card

Typically, this involves making a refundable deposit of $500 or less in exchange for a credit line equivalent to this amount. You can improve your credit score by using the card to make small purchases — without exceeding a utilization ratio of 30 percent — and paying the bill in full each month.

“Secured credit cards are typically issued to people with no credit or poor credit,” Huynh says. “This would include someone who needs to rebuild credit following bankruptcy, who needs help in building credit for the first time or who has a very difficult time managing spending and use of a credit card.”

The bottom line

Getting a personal loan with a 550 credit score is possible. However, you’ll need to invest the time in shopping around to find lenders willing to work with you. This is time well spent, as it will also allow you to find the best personal loan interest rate possible.

If you cannot get a personal loan with bad credit, consider redirecting your efforts toward improving your credit score. Then reapply for a loan in a few months.