How to Boost Your Odds of Personal Loan Approval

1. Improve Your Credit Score

One of the highest-impact ways to increase your likelihood of personal loan approval is improving your credit score. The minimum credit score to get a personal loan is generally 580, while a score above 700 will help you qualify for the lowest interest rates available.

Your credit score doesn't just determine whether you can get a loan, or the interest rate you qualify for. It can also affect whether you have to pay an origination fee, how large a loan you can take out and the range of repayment terms you can choose from.

To increase your credit score:

• Prioritize paying every bill on time.
• Lower your credit card balances.
• Keep your oldest credit card account open, even if you use it only sparingly.
• Dispute inaccuracies on your credit report, which you have a right to do.
• Become an authorized user on a loved one's credit card account, especially if your credit file is otherwise thin.

Learn more: Personal Loan Requirements to Know Before You Apply

2. Lower Your Debt-to-Income Ratio

Another important contributor to personal loan approval is your debt-to-income ratio (DTI), or the amount of your monthly gross income that goes toward debt payments.

Reminder: If you earn $3,000 before taxes each month and your combined student loan, car loan and minimum credit card payments are $1,000, your DTI would be 33% (3,000 / 1,000 = 0.33).

The lower your DTI, the better your chances at approval. An ideal DTI for a personal loan application is 36% or less, though it's possible to get a loan with a DTI of up to 50% depending on lender requirements.

To reduce your DTI, you can either increase your monthly income or lower your debt payments. Try to pay off credit card debt, for example, ask for a raise or make extra payments toward loans so your debt obligations are lower.

Learn more: What Is Debt-to-Income Ratio and How Do I Calculate It?

3. Get Prequalified

Prequalification is a process that lets you check whether you're eligible for a personal loan, and how much you could borrow, without filling out a full application or undergoing a hard credit pull. That prevents you from receiving a hard inquiry notation on your credit report, at least at this stage of review, which would be visible to creditors and could temporarily lower your credit score a few points.

You can prequalify for loans on lenders' websites by providing basic information like your name, Social Security number, address, income and reason for getting a loan. From there, you can apply exclusively for the loans that you've prequalified for. Similarly, Experian's personal loan marketplace offers a No Ding Decline^™⊛ feature. When you apply for loans with the "No Ding Decline" label, your credit report won't list a hard credit inquiry if your application is initially rejected, preventing harm to your credit score.

Learn more: Prequalified vs. Preapproved: What's the Difference?

4. Avoid Applying for Multiple Loans at Once

Avoid applying for multiple types of loans at one time, such as a mortgage and a personal loan, since lenders will view that as a potential request for more credit than you can reasonably manage. It's also best to keep your applications for personal loans within a single, 14-day period, so that the credit bureaus view these applications as rate shopping and minimize the hard inquiries' effect on your credit score.

Prequalifying can help protect your credit score in this instance too. You can avoid hard inquiries altogether by seeking prequalification, comparing offers and then only officially applying to the lender that's likely to approve you.

Learn more: Do Multiple Loan Inquiries Affect Your Credit Score?

5. Show Stable Income and Employment

Personal loan lenders want to see that you earn enough to comfortably afford your new loan payments, and that you're not likely to suddenly lose your income during the repayment term.

During the application process, the lender may ask for your employer's name and phone number, your annual income and verification of your income in the form of pay stubs or tax returns. They may also want to know how long you've been at your current job and other details of your job history to see whether you're likely to job hop. Showing at least two years of stable employment at the same company could increase your chances of approval.

Learn more: How to Get a Personal Loan With Low Income

6. Borrow Only What You Need

The higher the loan amount you request, the more the lender will want to confirm you have the income, credit score, job stability and payment history to pay down the loan as agreed. That means you will likely increase your chances of approval if you seek a smaller loan amount.

Personal loans typically come in amounts from $1,000 to $50,000, with some lenders offering loans of less than $1,000 and others offering loans of up to $100,000. Negative marks on your credit report, a high DTI and other factors may lead a lender to qualify you for a loan amount at the lower end of the range.

You may be able to qualify for a bigger loan if you choose a secured loan, which will require you to back the loan with collateral such as a car or bank account balance. The downside is that you could lose the collateral if you don't make payments as required.

Learn more: How to Budget With a New Personal Loan

7. Consider Getting a Cosigner

A cosigner is someone with good credit who agrees to take on payment responsibility if you no longer pay your personal loan bill. A creditworthy cosigner can help you qualify for a personal loan if you wouldn't otherwise, and can help you get a lower interest rate or a larger loan.

Before agreeing, your cosigner should know that cosigning will affect their credit and DTI. If you miss a payment, for example, that will have a negative impact on the cosigner's credit score. Their own DTI will also increase as a result of cosigning your personal loan.

Learn more: Can You Get a Personal Loan With a Cosigner?

Frequently Asked Questions

The Bottom Line

There are many ways you can improve your chances at getting a personal loan. But the most important is focusing on your credit score, aiming for good or excellent credit so you can qualify for a range of loans with low rates and low fees. To start, check your credit scores for free, and identify what you can do starting today to boost your score.

^⊛Applying for loans labeled No Ding Decline^™ won't hurt your credit scores if you aren't initially approved. Initial approval and/or acceptance of this loan may result in a hard inquiry, even if you're unable to pass final verifications, which may impact your credit scores.