Will an emergency loan impact my credit?
Key takeaways
- When you apply for an emergency loan, a lender usually performs a hard credit check to review your credit history and reports, temporarily lowering your credit score.
- Making on-time payments on an emergency loan can positively impact your credit over time.
- You’ll also diversify your credit mix, which could help your credit score, but it’s vital to repay the loan on time to avoid credit damage.
An emergency loan is any money you borrow to help cover an unexpected expense. There are many different types of emergency loans, including personal loans, credit card cash advances, payday loans and paycheck advances.
Unexpected expenses can be difficult to pay for if you don’t have a large amount of money saved up. Things like emergency home repairs or medical expenses can quickly add up. Only 46 percent of U.S. adults have enough money saved up to cover three months of expenses (the recommended emergency savings fund amount), according to data from Bankrate’s 2025 Emergency Savings Report. An emergency loan may be your best option.
Taking out an emergency loan will likely impact your credit, depending on the type of loan, but the impact can be positive or negative. You first need to understand how credit mix and payment history will impact your credit before deciding an emergency loan is right for you in the long run.
Best Emergency Loans
Typical interest rates for emergency loans range from 7 percent to 36 percent. Compare loan options before deciding on the best option for you.
Learn moreWhat is the minimum credit score for an emergency loan?
Credit score requirements typically vary by lender and loan type, but you typically need at least fair credit – a FICO score of 580 to 669 – to qualify for an emergency loan. The better your credit, the better the interest rate you will get on the loan. A good FICO credit score is anything between 670 to 739, and very good credit scores are 740 or higher.
| FICO credit score range | Rating |
|---|---|
| 300-579 | Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very good |
| 800-850 | Exceptional |
While better credit is favorable, it’s possible to get an emergency loan with bad credit. Options will be limited, and interest rates can be much higher than those with better credit scores. Generally, payday loans are not recommended, but if you need the funds desperately, research payday loan alternatives and understand all the terms and consequences before committing to them.
Bankrate’s take: Make sure you will be able to pay back any bad credit loan you take out. Don’t take out an emergency loan if it negatively affects your financial health, as it will likely make your situation worse in the long term.
Best bad credit loans
Want a loan but credit score is less than ideal? Find out what lenders are offering through Bankrate's rate page.
Learn moreOther eligibility requirements for emergency loans
A good credit score is very important for loan approval, but it’s not the only factor lenders consider. They will also evaluate the following:
- Your income
- Your current debts and assets
- Your ability to repay any new debts
- Proof of identity
- Proof of address
How emergency loans affect credit
Emergency loans are typically unsecured personal loans. Just like any other loan, taking out an emergency loan requires a hard credit inquiry from the lender. This can create a temporary dip in your credit score, but taking out emergency loans can also help your credit score if you make timely payments.
Pros
- Can create positive payment history
- May improve credit mix
- Can help consolidate high-interest debt
Cons
- Adds hard inquiry to credit report
- Can create a debt you are unable to repay
Best personal loan rates
Want to know what rates lenders are offering for personal loans? Bankrate has all the information you want to know about lenders in one place.
Check out lenders now1. Can create positive payment history
Taking out an emergency loan can boost your credit score by giving you a strong payment history if you can make timely in-full payments. Payment history accounts for 35 percent of the calculation for FICO credit scores, making it the most important factor.
Bankrate’s take: Opening a new loan means you have a monthly opportunity to add regular payments to your credit history. Each on-time payment creates a positive point in your credit history. Payment history is the most heavily weighted factor in your credit score.
2. May improve credit mix
Your credit mix also impacts your credit score, accounting for 10 percent of your score. Credit mix is the variety of account types you have in your credit portfolio.
Having different types of credit accounts open – such as credit cards, personal loans, car loans and mortgages – contributes to a better score. If the type of emergency loan you take out is a new type of personal loan, it can help improve your credit mix and increase your credit score.
Keep in mind: It’s never a good idea to open a new credit account just to improve your credit mix. If you are unable to keep up with payments, the benefit of a more diverse credit mix will be outweighed by the negative impacts of late or missed payments. It’s a good idea to aim for two different types of credit accounts at a time.
3. Can be used to consolidate high-interest debt
According to Bruce Gehrke, senior director of lending intelligence at J.D. Power, many unsecured personal loans “are used to refinance high-cost debt such as credit card balances.” Studies at J.D. Power show only 25 percent of borrowers use unsecured personal loans for other purchases, such as life events or unexpected costs.
Personal loans are primarily a financial management tool used to restructure high-cost revolving debt to lower-cost fixed payment loans.— Bruce Gehrke, senior director of lending intelligence at J.D. Power
Combining multiple high-interest debts you are unable to pay into one loan with a lower interest rate can help. If finding a personal loan with a lower interest rate means you can make timely payments you weren’t making before, your credit score will likely improve. Making regular, on-time payments has a positive impact on your credit score.
4. Adds hard inquiry to credit report
When you apply for a loan with any lender, the lender will perform a hard inquiry on your credit. This means the lender requests your credit info from the credit bureaus to understand your credit history and determine if your credit meets the underwriting criteria.
A hard inquiry makes your credit score go down in the short term – typically for a few months – and it may stay on your credit report for two years. Too many inquiries at once may indicate to lenders you are applying for multiple loans at once, and they may think you won’t be able to pay them all back.
Gehrke says prequalifying can give borrowers an advantage since they can get a “basis for rate/fee comparison” without having lenders pull a hard credit inquiry that would negatively impact their credit score.
We don't know if [preapproval] improves underwriting chances, but it can definitely be used to reduce the anxiety of getting approved.— Bruce Gehrke, senior director of lending intelligence at J.D. Power
5. Can create a debt you are unable to repay
If you take out an emergency loan without the funds to pay it back, your credit score will likely be negatively affected. Just as making timely payments contributes to a strong payment history, late payments or no payments at all contribute to a poor credit history. Missed payments can bring your credit score down fast.
Bankrate’s take: Improving your credit score after a missed or defaulted payment can take time, so it’s best to avoid missed payments altogether.
How long it takes to bring your score up depends on a number of factors, including the length of your credit history. However, it can take up to 18 months of good credit activity to improve your score after a missed or defaulted loan payment.
Bottom line
Taking out an emergency loan impacts your credit, but the long-term effect can be positive if you responsibly manage the loan. Before applying, weigh the pros and cons and evaluate your financial situation, unique needs and the lender’s eligibility factors to determine if you should move forward.
If not, look into alternatives, like a loan from friends or family or a credit card with a low interest introductory period to secure the funding you need.
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