Poor personal credit can significantly impact loan approval. Lenders use credit scores to assess a borrower's reliability and risk level. A low score often leads to higher denial rates, higher interest rates, or stricter terms.

Credit scores reflect a borrower's credit history, including payment behavior, debt-to-income ratio, and credit utilization. Lenders, such as banks and mortgage companies, typically require scores above 580 for most loans. For example, the Consumer Financial Protection Bureau (CFPB) reports that 20% of consumers with scores below 580 are denied credit. The Federal Reserve's 2022 study found that 60% of lenders automatically reject applications with scores below 620. Additionally, borrowers with poor credit may face interest rate increases of 5-15% compared to those with excellent credit. For instance, a 2023 report by Experian noted that loan approvals for scores under 600 dropped by 35% during the pandemic compared to 2019. These statistics highlight how poor credit directly influences loan accessibility and terms, as lenders prioritize minimizing financial risk.