If your credit score isn’t the highest, it can sometimes feel challenging to get larger purchases covered. Going solar is a big purchase, so many homeowners look to finance their solar system. While your credit score and current debt-to-income ratio (DTI) are usually factors in your approval and interest rate with a lender, there are ways to go solar even without stellar credit. In this article, we’ll share some resources and options for you to consider.
Disclaimer: This article is intended to provide an informational overview of the solar loan fees for interested homeowners. It is not intended to serve as official financial guidance. Readers interested in installing solar products should use their best judgment and seek advice from a licensed professional before making any purchase or investment.
Key takeaways
The first step in understanding how your credit impacts your solar loan is knowing what’s on your own credit report and knowing your credit score – we share some resources so you can find out both for free!
There are some non-traditional solar financing options to be aware of that may help you go solar if you have a lower credit score.
Some states and non-profits offer special programs for you to explore solar if you meet certain low-income requirements.
If you’re planning on going solar in the near future, you can still take steps to build up your credit in the meantime.
Sign up for a free account on the EnergySage Marketplace to compare solar quotes, including financing options from top lenders.
What’s in this article?
Understanding your credit
Before you even get started exploring solar financing options, it’s best to know where you stand. Check your own credit report and score, just as you would with big purchase planning like buying a car or home.
How to get free access to your credit report
You are entitled to 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’re able to access these free credit reports via AnnualCreditReport.com, which is the official site (other than each credit bureau’s website), so protect your personal information by not entering it on just any website! 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, if you forget to cancel, you’ll end up paying a monthly fee.
How to check your credit score for free
Your credit score is separate from your credit report, though it’s basically 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 a few ways, including:
See if your current bank or credit card offers a free credit score or credit monitoring. Many do let you see a credit score, so if you have an existing account check your online account or ask a customer service rep or agent.
You can check your FICO Score for free with Experian. They also have some paid credit monitoring services, but this one is available at no charge.
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.
One important thing to remember is that there are lots of different credit scoring models used, so your score can vary depending on the credit score your lender is using. The FICO Score is the most commonly used score, but even if you get access to another score for free, you can usually see factors impacting your score like high balances or numerous inquiries as well as the basic score range (e.g. poor, good, excellent), which are often comparable across different scores. Even if you have a lower credit score, you can often still qualify for a solar loan – it just may cost you a bit more in interest, so your monthly payment will be higher.
Some non-traditional solar loan options
With solar growing in popularity, there are more and more financing options becoming available, which may make it easier for you to invest in clean energy for your home and save money.
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)
North Carolina Clean Energy Fund (NCCEF) – Currently the NCCEF board is working to raise initial capital and operating funds.
Capital Good Fund: DoubleGreen Loans
Locations available: Currently in Massachusetts and Rhode Island, coming soon to Texas Loan amounts offered: $5,000 to $60,000 Interest Rates: 1.49% to 2.49% Effective APR: 3.099% to 4.72% Term length: 25 yrs Payment details: Interest begins to accrue at day 61 and you have no payments for the first three billing cycles. There’s also an option of interest buydown for a 20% closing fee (which is rolled into the loan). Loan type: Currently unsecured, but they’re planning to offer secured solar loans in the future Note: Interest rates are confirmed as of May 2022 and subject to change.
This mission-based organization is a non-profit lender dedicated to helping people fix their finances and have better access to sustainable financial opportunities like solar. Founder and CEO Andy Posner shares, “We’re seeing transparency doesn’t necessarily permeate the solar financing space. For instance, many options have fees added that may confuse consumers. Capital Good Fund is dedicated to full transparency and simple disclosures of fees, no teaser payments, and providing options that work for you based on your situation.”
Details on their solar loan product: The DoubleGreen Loan can be used towards solar panels or also other clean energy upgrades such as high-efficiency heating and cooling equipment like heat pumps, insulation, and replacement windows. They have a team dedicated to solar loans, so you can submit a form to ask any questions as well here.
What makes them stand out: Capital Good Fund is focused on helping people in communities who may not usually get opportunities for solar and other financial support. To date, they have helped fund 10,000 loans totaling $20 million and have graduated 2,000 people through their financial and health coaching programs. Maria Hidalgo, who used the DoubleGreen Loan to go solar, shares her story:
“I decided I wanted to own my solar panels for many reasons — it is cheaper than my electric bill, the tax credits are great, and it’s good for the environment. As a mother, I want to protect my children’s future, financially and environmentally. By giving me this loan, Capital Good Fund has made it possible for me to realize this dream. For now, I am just one of a few in my community who will have solar panels. I can confidently tell my friends, family, and neighbors that it’s a great opportunity. I hope to see a lot more solar around me and I hope they’re as lucky as me to work with a community-oriented lender like Capital Good Fund.”
Other loan options
Outside of Green Banks and DoubleGreen Loans, there are some other loan options you’ll want to know about. First, if you have a local lender you usually work with, you can always check with them to learn about financing options. Having an established account history of on-time payments or existing credit with them may mean reduced scrutiny or relaxed requirements to get additional financing through them.
Additionally, EnergySage installers can provide quotes for financing through a lender they partner with during your simple quote process on the EnergySage Marketplace. Just select that option or speak with your installer about options to finance your solar system.
Other state-specific options for low income or low credit solar
Depending on where you live, there may be some additional options, including:
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 Program managed by GRID Alternative helps by providing up-front rebates to defray the costs of installing a solar system. You do have to be a homeowner and qualify, which you can learn more about on their website.
Not ready for rooftop solar? Consider community solar
Community Solar provides many of the benefits of rooftop solar, but there are no upfront costs and there’s less commitment required. Go solar by subscribing to a local community solar farm: you’ll still reduce your electric bill and your climate impact without installing a single solar panel! While some projects require a minimum credit score, others have no credit score requirements. Visit our Community Solar Marketplace to compare projects and find one near you.
How to improve your credit
If you don’t have an established credit history or maybe made some past mistakes, working on ways to help increase your credit score might make solar more accessible (through higher approval odds and lower interest rates). It’s never too soon to start building credit! There are some free or affordable ways to do so, including:
Speak with a non-profit credit counselor
The National Foundation for Credit Counseling (NFCC) is a non-profit organization that helps people review their credit, create debt management plans, and even recover after a bankruptcy. You can speak with an NFCC credit counselor for free – they have locations throughout the U.S! Keep in mind that their counseling and financial planning services may be paid, but they are often more affordable than other financial consultants, offer a free initial consultation, and provide lots of great free resources on their website.
Regularly monitor your credit
Use a free credit monitoring app or website to get suggestions or flag what to work on first. 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. By using these apps, you can take steps to reduce debt, pay off balances, and build your credit to help your score improve over time.
Experian also has a free product called Boost, which allows you to use bills you pay to help increase your credit score. Basically, you’re getting credit (pun intended) for paying other bills on time that might not normally be included in your credit report and impact your credit score. Some of the bills include Netflix, AT&T, Spectrum, and Sprint and their website touts that millions of points have been added across the country because of it. So, if your score is lower and you use streaming or cell providers like the ones they show, it may be worth signing up to see if you can get a free boost to your credit score.
Make a plan
There are a few areas that impact your credit score most: payment history, amounts owed or credit usage, and credit history. Here are some ways to get started if looking to improve any of these:
Payment history: One of the best things you can do for your credit is ensure you’re paying 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 usage: 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 a key item many lenders look at when considering loan approval.
Credit history: If you haven’t yet built up much of a credit history, lenders just don’t know that you have a solid track record of using credit 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 are 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 growing, with a startling 47 percent of Americans having experienced financial identity theft in 2020. 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. Basically, if someone steals your identity and applies for credit in your name, your credit can suffer and you may not even know it.
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 do find out you have been 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.
What to do if you’ve been denied credit
If you happen to have already been turned down for credit (whether for a solar loan or any other credit application), your lender is required to give you:
The credit score they reviewed and the key items that affected your score
The reasons your application was rejected
The name and contact information of the credit bureau who provided the credit report they reviewed so you can request a free copy within 60 days
These requirements are part of the Equal Credit Opportunity Act (ECOA), which also prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance. The Consumer Financial Protection Bureau (CFPB) also provides some tips on what to know if you’re declined when applying for credit.
How to find the best solar loan for you
The best solar loan option for you will depend on where you live and your specific financial situation. Similar to selecting your solar equipment, getting various solar loan options is the best way to see what’s available to you. 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.
Frequently asked questions about credit and solar financing
What credit score is needed for a solar loan?
Usually, you’ll need a minimum score of 600 or 650. However, a credit score isn’t the only important number when getting a solar loan: the overall requirements to get approved depend on your lender and other factors, including your existing debt. You can get in touch with trusted lenders to learn more about their requirements, get pre-approved, and see what terms you might qualify for with a solar loan.
What is a finance charge on a solar loan?
Your finance charge or interest rate on a solar loan will vary depending on a few factors, including the type of loan (secured or unsecured), your credit score and current debt, and the current U.S. Federal Reserve (the Fed) rate. Your annual percentage rate for solar may be approximately 4 – 5 percent.
Are solar loans tax deductible?
That depends. You can sometimes claim the interest of your solar loan as a “capital investment” to your home if you itemize deductions for your federal taxes. Of course, you’ll need to check with your CPA or a tax professional to confirm based on your individual situation and tax filing and confirm the most up-to-date IRS guidelines. Separately, adding solar panels to your home (whether you pay cash or with a loan) does qualify you for the investment tax credit (ITC), also known as the federal solar tax credit, which allows you to deduct 26 percent of your solar installation costs from your federal taxes as of 2022.
How to find trusted solar lenders
You can easily 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.
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