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Credit Score Brackets for Loan Approval

5 min read

credit score brackets for loan approval

Written By

Courtney Johnston
Courtney Johnston

Understanding credit scores is crucial for ensuring you have a good chance of securing a line or credit or a loan when you need it. A good credit score falls within a favorable range, influencing credit limits and lending decisions. Your credit scores, a reflection of your credit history within the credit score range, determines access to loans and favorable rates.

Regularly checking your credit report ensures accuracy, impacting creditworthiness. Managing credit accounts and maintaining a positive payment history contribute to achieving a good credit score. Accessing free credit scores aids in monitoring financial health. Striving for a good credit score range secures better opportunities while demonstrating responsible credit management, crucial for future financial endeavors.

You never know when you might need a personal loan. Sometimes emergencies pop up and access to cash is the best way to get back on track. But in order to get approved for a personal loan at a good rate — or at all — you’ll need a good credit score. A lender is more likely to approve you and offer you a favorable interest rate if you have a higher credit score. If you’re considering applying for a loan, here’s how you can prepare and ensure your credit scores remain as high as possible.

Best credit score brackets for loan approval

While a higher credit score can unlock better loan benefits, you’ll typically need a score of 600 or higher to get approved for a loan, according to credit bureau Equifax. The exact score you’ll need will vary by lender and the loan amount. Lenders see borrowers with higher scores as less risky, and are more likely to approve them at more favorable terms.

Maintaining a good credit score is pivotal for financial health. Your credit score, falling within a defined credit score range, reflects your creditworthiness. A good credit score opens doors to favorable credit limits and attractive interest rates. Regularly checking your credit report ensures accuracy in your credit history and identifies areas for improvement. Understanding credit score ranges is crucial, with a good credit score range offering better financial opportunities. Payment history plays a pivotal role in shaping credit scores. Utilizing tools and services that offer free credit scores empowers informed credit management. Managing credit accounts responsibly contributes to achieving and maintaining good credit scores.


Credit scoring models analyze debt to credit ratio, a key factor in credit score calculations. Credit reporting agencies like credit bureaus compile data from loan or credit card usage for credit reports. Understanding how credit scores work involves grasping revolving credit and its impact on scoring models. Here’s a quick look at the credit score brackets in Canada so you can see where you fall when you pull your report and look at your credit scores:

Ranges to know when looking at your credit scores

There is a quick reference chart of how the credit bureaus calculate credit scores:

Below 560- Poor or bad credit scores

560 to 659- Fair credit scores

660 to 724- Good credit scores

725 to 759-Very good credit scores

760 and up- Excellent credit scores

If your score is above 760, you’ll have a higher chance of getting approved for a larger loan with a lower interest rate. If your score is above 600 but below 760, you could still get approved for a loan, but might need to apply for a lower loan amount. If your score falls in the fair to good range, expect to pay a higher interest level than someone with very good to excellent credit.

What credit scores you need to qualify for a personal loan

Your credit score isn’t the only factor lenders look at when evaluating whether or not to approve you for financing. In addition to reviewing your credit score bracket, they’ll also consider your full credit history and your debt-to-income ratio.

Your credit history is a full account of your previous credit accounts, typically for the past six years. Your score gives lenders a good idea of your credit habits, but your full history paints a broader picture and can offer more insights for lenders. This report will show if you have poor credit and should be considered a risk for credit card issuers and other financial providers. This also gives insight into your credit utilization, your current credit range, and what your available credit might be in the near future.

Having a low debt-to-income ratio, or DTI, is another signal lenders look for when approving borrowers. Your DTI measures your monthly debt payments against your monthly gross income (the amount you earn before taxes are taken out). So, if you pay $1,000 in debt payments a month and make $4,000, your DTI would be 25% (1,000 divided by 4,000). Lenders look for a DTI of 41% or less to ensure you can afford to take on another debt payment. If your DTI is higher, you’re less likely to get approved for a loan because of your credit score.

If your credit score needs some work or you have a higher DTI, working on your credit before applying for a loan can improve your chances of getting approved for the money you need. It is important to show healthy credit habits and a reliable payment history on your credit card balances if you want to reach and maintain an excellent credit score.

Tips for improving your credit scores before applying for a loan


Credit reports and credit rating detail credit utilization, available credit, and factors that end up impacting multiple credit scores you may have over the course of a year or more. Understanding the credit scoring model aids in calculating credit scores, and determining eligibility based on minimum credit score requirements. Many services offer free and easy access credit scores, valuable for monitoring financial health and assessing creditworthiness.

To boost your chances of loan approval and help your score jump into the next credit score bracket, spend a few months working on your credit and lowering your debt. Here are a few tips to get started and to help you prepare for upcoming credit checks:

  • Set up autopay. To avoid missing any debt payments, make sure autopay is turned on to ensure you pay the minimum payment (or more if you can afford it) each month. It will help you pay off and manage your debt while also helping control your debt to credit ratio and improve your standing with the main credit bureaus and leading Canadian credit bureau companies. This will also go a long way in giving you a good payment history and help boost your credit score ranges.

  • Keep your balances low. If you’re repaying debt, you might want to pause on using more of your credit lines. But if you’re not, make sure you don’t charge more than 30% of your credit line at a time — even if you can afford to pay it back. Keeping your credit utilization (the amount you owe vs the amount of credit you have access too) below this number will help your credit score rise and show favorably on your credit report.

  • Apply a debt repayment strategy. To put a dent in your debt, follow a debt repayment strategy like the snowball method or avalanche method. With the snowball method, you pay the minimum amount on all of your debts, while also putting more money towards your lowest balance debt. Once that’s paid off, you’ll turn to the next lowest, and so on. With the debt avalanche method, you’ll also pay the minimum on all accounts, and pay more than the minimum on the debt with the highest interest rate. Both methods work well, but the snowball method can help you see small wins more quickly, while the avalanche method will save you more in interest. All of this will help boost your credit scores.

How to compare personal loans

Once you’re ready to apply for a personal loan, be sure to compare offers from different lenders. Even if you’re approved, don’t jump at the first loan offer you receive.

Before applying, check different annual percentage rates across multiple lenders to find those offering lower rates. Then, narrow your choices down based on credit score requirements, the loan amounts they offer, and repayment terms.

From there, see if you can prequalify for loans with multiple lenders. Prequalifying allows you to see if you’re likely to get approved and at what rate. Though it’s not a guarantee of approval, it can be helpful when narrowing down choices. And, prequalifying won’t hurt your credit score.

Final thoughts on credit score brackets for loans

Knowing your credit score bracket can help you understand your chances of getting approved for a personal loan. But a high credit score alone may not be enough to help you lock in a low rate on interest. Be sure to work on reducing your debt first and compare offers from multiple lenders before settling on a personal loan provider.


When considering a loan, understanding credit scores and debt to credit ratio is crucial. Credit reporting agencies compile credit reports, influencing credit scoring models used by lenders. Your credit score greatly impacts loan approvals; lenders assess risk based on this score. Different loans have varied minimum credit score requirements. Credit scores work as a pivotal factor in loan approvals, affecting the likelihood of lender approval.

Lenders evaluate credit reports to assess borrower risk, determining if the applicant meets their criteria. A good credit score increases approval odds, reflecting responsible credit behavior. Knowing what lenders consider in loan applications, especially credit score calculations and the impact on approval odds, empowers individuals seeking loans, emphasizing the importance of maintaining a healthy credit profile.

Let KOHO help with improving your credit history and scores by showing you practical steps and offering assistance that can reflect favorably on your credit report. KOHO credit building services can help you improve your credit scores and build a favourable history that will open doors for more opportunities down the road. Contact our team today to get started!.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Courtney Johnston

Courtney is a professional writer, editor and financial literacy enthusiast. You can find her writing on CNET, Investopedia, The Motley Fool, Yahoo Finance, MSN and The Balance. She spends her free time exploring different cities across the globe or enjoy some downtime with her two cats and one dog.

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