Can I get a loan if I have a bad credit score? – Forbes Advisor UK

If you have a bad credit rating, you will be refused the most competitive personal loans on the market. But that doesn’t mean you won’t be accepted anywhere. We take a consider your options if your credit score is not up to par.

What is a bad credit score?

When you apply for credit for any type of credit, the lender check your credit report to see how reliable you are as a borrower. If you have “bad credit” or a low credit rating, it may mean that you have had trouble paying off your debts in the past.

You might have a low credit score for reasons such as:

  • late monthly repayments
  • completely missing payments
  • bankruptcy
  • an individual voluntary arrangement (IVA)
  • County Court Judgments (CCJ)
  • too many “hard” searches on your credit report – a thorough search is recorded every time you apply for credit, and too many searches in a short period of time can make you feel like you are desperate for credit.

You can also have bad credit simply because you haven’t borrowed in the past and haven’t had time to build up a credit history.

If any of the above reasons apply to you, lenders will consider you “high risk” which means it will be more difficult for you to get a loan.

What Kind of Loan Can I Get With Bad Credit?

If you have a bad credit rating, your choice of loan options will be more limited. However, you can still choose from the following:

Personal loan (unsecured): This type of loan is “unsecured”, so you won’t need to use an asset like your house or car as collateral, but you will have limited choice if you have a bad credit rating and interest rate. interest charged will be higher.

Secured loan: With this type of loan, the amount borrowed is secured by an asset, usually your home. For this reason, they are also known as homeowner loans or second mortgages.

Secured loans are much riskier than unsecured loans because if you fail to keep up with your repayments, you could lose your home.

The upside, however, is that lenders may be more willing to lend to you because of the secured asset, which usually means the interest rate will be lower.

Guarantor loan: With a guarantor loan, someone like a friend or family member (who will need a good credit rating) agrees to take on the debt if you are unable to pay it off.

Lenders are more likely to let you borrow if they know someone else will be tracking repayments if you can’t. Debt is unsecured, so it will not be tied to your house or any other property.

Compare loans from major providers

Find loans you’re most likely to be approved for, without affecting your credit score

What are the advantages and disadvantages of bad loans?


  • You can often access your funds quickly – sometimes within 24 hours
  • If you make your repayments on time, your credit score will increase, helping you access more competitive loans and other forms of credit in the future.
  • Monthly repayments are fixed, which makes budgeting easier.

The inconvenients

  • There is no flexibility with loan payments, so if you regularly miss your monthly payments, you risk further damaging your credit score.
  • If your loan is secured against your home and you can’t keep track of your repayments, your lender has the legal right to repossess your property.
  • Interest rates are likely to be higher if you have a bad credit rating, making your overall debt more expensive.

How can I improve my credit rating?

If your credit rating is low, the good news is that there are several things you can do to improve it. These include:

  • regularly check your credit report and correct any errors
  • register on the electoral roll (if not already done)
  • pay bills on time
  • space credit applications by at least three months, ideally six
  • keep your “credit usage” low – this is how much of your available credit limit you are using (about 30% is about right).

What else should I consider?

If you are considering taking out a loan with a bad credit rating, you need to think carefully about how much you need to borrow and how much you can afford to pay off each month. Set a monthly budget and make sure you stick to it so you don’t miss out on any repayments.

You should also consider the repayment term. Choosing a longer term will reduce the amount you have to repay each month, but the interest rate will likely be higher and the total cost of your repayment will also increase – so you will repay more overall.

Before applying for a loan, it may be helpful to use an eligibility checker (usually now offered by lenders and comparison sites) which will show you the likelihood of you being accepted for a particular loan without affecting your credit score. .

You can also consider using a credit card, which is designed to help borrowers repair, improve or “build” their credit score. Acceptance criteria are usually lower, so a credit card may be a good choice if you can’t get credit elsewhere.

Note that credit cards generally have low credit limits and high interest rates, so it’s best to pay off your balance in full each month. But used wisely, this type of card can help you improve your credit score over time. You can find out more in our guide.

Compare loans from major providers

Find loans you’re most likely to be approved for, without affecting your credit score

About Arla Lacy

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