Can you go solar with a low credit score?

Having poor or fair credit can make it more challenging to be approved for all types of loans, including solar loans. If you don’t have good credit, lenders and financial institutions tend to see it as riskier to lend you money, and will often charge you a higher interest rate to borrow funds to cover that risk. If you want to finance your solar panel installation, most solar loans typically require a minimum credit score of 650, but some lenders will accept scores as low as 580.

One important benefit of many solar loans is that, once approved, the interest rate will likely stay the same for all customers regardless of your credit score—unlike what happens with most mortgages or car loans. It’s because most solar lenders operate on a pass/fail model that doesn’t factor in credit tiers. Of course, not all lenders operate this way so it’s smart to ask how your lender determines your rate before signing. 

"It varies with different lenders," said Chris Cucci, executive vice president at Climate First Bank. "So it's important to ask that question. The last thing you want is to get a really low teaser rate, and then when you apply if your credit is less than perfect, the rate ends up being significantly higher."

We’ll walk you through the ways your credit score impacts your chances of being approved for a solar loan, what your loan options are, and how you can raise your score if you don’t have good credit.

Don’t be discouraged if you don’t have good or excellent credit. There are alternative financing options and ways to qualify for loans that will still provide you with the funds to go solar. For example, you can apply for a loan through a local credit union or take out a home equity loan on your home.

Knowing where you stand with your credit before you start exploring solar financing will help you understand what type of loans you can qualify for. Check your credit report and credit score as you would for any big purchase, such as buying a car or a home. Even if you aren't going solar, it's a good idea to periodically check your credit report to make sure it's accurate and there are no errors. You can dispute anything on your credit report that doesn't look right.

How to get free access to your credit report

You can get free weekly credit reports from each of the three major U.S. credit bureaus—Equifax, Experian, and TransUnion. You can access these free credit reports via AnnualCreditReport.com. Be cautious of any sites that require you to enter credit card information before you can see your credit report. Even if they offer a free trial, you'll pay a monthly fee if you forget to cancel. Don't share any personal information on a website you don't trust.

How to check your credit score for free

Your credit score is separate from your credit report, but it's determined by many of the items in your credit report. So, when you get a copy of your credit report, it won't include your credit score. You can get your credit score for free in a few ways, including:

• Many credit cards will show your credit score for free, as well as offer credit monitoring.

• You can check your FICO Score for free with credit monitoring services like Experian. They have some paid credit monitoring services, but this one is free.

• Credit Karma offers free VantageScore 3.0 credit scores from Equifax and TransUnion via their website and app.

• Credit Sesame provides a free TransUnion credit score on their website.

Depending on the credit scoring model your lender uses your score will vary, but a FICO score is the most common. Most credit scores will also come with basic information explaining what's impacted your score such as high balances, your credit utilization and late payments. Even if you have a low credit score, you may still qualify for a solar loan, but you may be charged a higher interest rate, resulting in higher monthly payments and less savings over time.

As more homeowners go solar and the cost to install solar panels continues to drop, more loan and financing options are becoming available. If you don’t have good credit, you can look into loans from credit unions, which tend to have better interest rates and terms overall, or consider a home equity loan or home equity line of credit (HELOC), both of which allow you to borrow against the equity you've built up in your home.

You can also look into green banks specifically, which exist “to maximize clean energy adoption.” They often have lower interest rates, longer loan terms, and zero-down payment loans for homeowners looking to go solar. 

Below is a list of some green banks worth looking into, depending on where you live:

Depending on where you live, you may have additional options:

Energy for All Program

If you live in California, Colorado, Delaware, Maryland, Virginia, or the District of Columbia, you may have access to GRID Alternatives and their Energy For All Program. According to their website, they help "provide low-to-no cost solar electric systems to families that qualify as low income, and install them using a barn-raising model that gives volunteers and job trainees hands-on experience they can use to get jobs in the growing solar industry." You can learn more about the program and if you're eligible on their website.

Single-Family Affordable Solar Homes Program

If you live in California, the Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) Program, administered by GRID Alternative, provides qualifying homeowners up-front rebates to defray the costs of installing a solar electric system. Eligibility is based on income and location, you can learn more about on their website.

If you don't have an established credit history or have any negative dings on your credit report, there are ways to improve your score:

Speak with a nonprofit credit counselor

The National Foundation for Credit Counseling (NFCC) helps people review their credit, create debt management plans, and recover after bankruptcy. You can speak with an NFCC credit counselor for free – they have locations throughout the U.S. You have to pay for their counseling and financial planning services, but they're often more affordable than other financial consultants, offer a free initial consultation, and you can find free resources on their website.

Regularly monitor your credit

Apps like Experian and Credit Karma offer free versions to view your score and learn about credit score factors that are impacting it most. Using these apps, you can reduce debt, pay off balances, and build your credit to help your score improve over time.

Experian also has a product called Boost, which allows your bill payments to count towards your credit score. So if you have a strong history of paying your utility or phone bill on time, they may help your score go up.

Make a plan

A few areas impact your credit score most: payment history, amounts owed or credit usage, and credit history. Here are some ways to get started if you are looking to improve any of these:

• Payment history: One of the best things you can do for your credit is to ensure you pay bills on time. Set reminders for due dates, and if you foresee an issue paying a credit card or another bill, reach out to your creditor or bank as soon as possible. Sometimes they can work with you if you give them a heads-up.

• Credit utilization: The percentage of your available credit you use has a significant impact on your credit score. If you have high credit card balances, paying them off will help your credit score improve. By creating a budget and setting aside extra money to pay down your debt, you can improve your debt-to-income ratio, which many lenders consider when evaluating loan approval.

• Credit history: If you don't have a long credit history, lenders don't know whether you have a good track record with credit cards and on-time payments. If you have a low credit score, you can check out secured credit cards, which are easier to get because you essentially fund the card with a deposit. They can be an excellent way to build credit if you don't already have a credit card.

Keep your personal information secure.

Unfortunately, data breaches and identity theft are commonplace these days. If you're not monitoring your credit, you may not find out you're a victim of identity theft until you get denied credit when applying for a loan. If someone steals your identity and applies for credit in your name, your credit can suffer.

By regularly monitoring your credit score and reviewing your credit report, you can be on the lookout for credit inquiries and accounts you don't recognize. If you discover you're the victim of identity theft, the Federal Trade Commission (FTC) has an online form that helps you take the necessary steps. If you find a fraudulent account or inaccurate information on your credit report, you should also contact that credit bureau immediately to begin the process of flagging the fraud and removing any inaccurate information.

The best solar loan option for you will depend on where you live and your specific financial situation. Just like selecting your solar equipment, soliciting various solar loan options is the best way to see what's available.

Make sure you ask questions to confirm any solar loan fees, check out any reviews available to ensure your lender has a solid reputation, and review the details on your payments over the lifetime of your loan. Working with a trusted installer and lender is a great way to ensure you're comfortable with your decision. If you want unbiased guidance on how to pay for your solar panels, you can schedule a call with an EnergySage Energy Advisor for free.

Want to see who offers solar financing near you? Search for lenders in your area.