How to get a personal loan with an average credit score

A credit score is a numerical rating that reflects your borrowing history and financial reliability. To determine this score, credit reporting agencies compile all your personal and financial information, including your previous loans, debts and the number of applications you’ve made to secure a loan. 

In Australia, credit scores typically range from 0 to 1,000 (Experian) or 0 to 1,200 (Equifax). They are classified as follows:

• Excellent: 800+ (Experian) / 833+ (Equifax)
• Very Good: 700-799 (Experian) / 726-832 (Equifax)
• Good: 625-699 (Experian) / 622-725 (Equifax)
• Average/Fair: 550-624 (Experian) / 510-621 (Equifax)
• Weak/Poor: Below 550 (Experian) / Below 510 (Equifax)

If your score falls into the "average" range, you may still qualify for a personal loan but could face higher costs.

Lenders use risk-based pricing to determine interest rates. This means they assess your credit history, income, and existing debts before offering you a rate within a set range.

Borrowers with an average credit score may receive higher interest rates than those with excellent credit. However, the exact rate is only confirmed once you apply.

To improve your chances of getting a competitive rate:

• Compare lenders to find the best rates for your score.
• Look beyond the interest rate and consider fees such as application fees, ongoing charges, and early repayment penalties.
• Consider improving your credit score before applying to access better loan terms.

There is no fixed amount you can borrow with a personal loan, as lenders assess each application individually. Your income, expenses, and existing debts play a crucial role in determining your borrowing capacity. Lenders evaluate whether you can manage repayments while covering essential costs like rent, utilities, groceries, and other financial commitments—ensuring you still have surplus funds.

With an average credit score, your borrowing capacity may be lower than someone with excellent credit. However, you can improve your chances by opting for a secured loan, where you offer an asset (such as a car or even art or jewellery) as collateral. This reduces the lender’s risk and may allow you to access a larger loan amount or a lower interest rate.

If your credit score is low but you can afford the repayments, you may consider a guarantor personal loan. The guarantor agrees to cover repayments if you default, reducing the lender’s risk.

Before applying, assess your budget realistically and use a personal loan calculator to estimate repayments. Borrowing more than you can afford can strain your finances and lead to missed payments, further damaging your credit score. If approval is challenging, focus on improving your credit score first—paying off outstanding debts, lowering credit utilisation, and making timely repayments can strengthen your profile and increase your borrowing power.