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. When it comes to solar, 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 600.

One important benefit of many solar loans is that once you’re approved, unlike mortgages and car loans, the interest rate for solar loans will stay the same for all customers regardless of your credit score because they operate on a pass/fail model. Of course, not all lenders employ this model, so it’s smart to ask how your lender will determine your rate. 

"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 with any big purchase you're planning, such as buying a car or 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 one free copy of your credit report every 12 months 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 now show your credit score for free, as well as offering credit monitoring.

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

• Credit Karma offers a 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, which will result in higher monthly payments and less savings over time.

As more homeowners install solar panels and the cost to go solar continues to drop, more loan and financing options are also 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:

Green banks

Green banks provide both homeowners and businesses with another route to take when looking to fund clean energy upgrades. Often, they can provide reduced interest rates, extended loan term lengths, and low or no-money-down financing options. Examples of green banks include providing solar loans in Connecticut. Some of the other major green banks include:

• California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA)

• Colorado Clean Energy Fund

• CT Green Bank

• DC Green Bank (Washington, D.C.)

• Energize Delaware

• Finance New Orleans (Louisiana)

• Florida Solar & Energy Loan Fund (SELF)

• Hawaii Green Infrastructure Authority

• Maryland Clean Energy Center

• Michigan Saves

• Montgomery County Green Bank (Maryland)

• New York City Energy Efficiency Corporation (NYCEEC)

• NY Green Bank

• North Carolina Clean Energy Fund

• Philadelphia Green Capital Corporation (Pennsylvania)

• Rhode Island Infrastructure Bank

Capital Good Fund: DoubleGreen loans

Locations available: Texas
Loan amounts offered: $5,000 to $60,000
Interest Rates: Starting at 3.99%
Effective APR: Starting at 5.81%
Term length: 25 yrs
Payment details: Interest begins to accrue on day 61, and you have no payments for the first three billing cycles. There's also an option of interest buy down for a 20% closing fee (which is rolled into the loan).
Note: Interest rates are confirmed as of June 2024 and are subject to change.

This mission-based organization is a nonprofit lender that provides better access to sustainable opportunities like solar.

Solar loan product details: The DoubleGreen loan can be used to finance solar panels or other clean energy upgrades such as high-efficiency heating and cooling equipment like heat pumps, insulation, and replacement windows.

What makes it stand out: Capital Good Fund focuses on helping people in communities who may not usually get solar and other financial support opportunities. The bank has funded more than 16,000 loans totaling $44 million.

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

Energy for All Program

If you live in California, Colorado, 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 Single-Family Affordable Solar Homes (SASH) Program managed by GRID Alternative helps by providing up-front rebates to defray the solar system's costs. You have to be a homeowner and qualify, which 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 see your score and learn credit score factors to understand what's impacting your score the 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're using has a big impact on your credit score. If you have high credit card balances, paying off debt will help your credit score go up. By making a budget and setting aside any extra money to pay down your debt, you can positively impact your debt-to-income ratio, which is what many lenders look at when considering loan approval.

• Credit history: If you don't have a long credit history, lenders don't know if you have a good track record using credit cards and making 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 up credit if you don't have a credit card already.

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 information that is not accurate on your credit report, you should also contact that credit bureau immediately to begin the process to get the fraud flagged and any inaccurate information removed.

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.

You can join EnergySage today for free to connect with installers in your area who offer financing options or work with trusted local solar lenders. Through your EnergySage account, you can compare multiple quotes and financing options. Just want to see who offers solar financing near you? Search for lenders in your area.