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Can I Get a Loan With Bad Credit?

Having bad credit doesn't necessarily mean you won't qualify for debt consolidation. Learn how we work with lenders who may approve those with poor credit histories.

When an unexpected expense arises, life rarely waits for you to get your finances in order. Unfortunately, having a bad credit score caused by past financial mistakes, inexperience, or hardships often makes borrowing money more challenging.

Many people assume that qualifying for a loan is impossible with a damaged credit profile – but this isn’t strictly the case. While approval may be less likely, specialised lending options do exist for higher risk borrowers. For example, many lenders are willing to offer consolidation loans to those with poor credit scores.

Loans for those with poor credit scores often have higher interest rates and stricter terms attached, but obtaining access to finance is not impossible. Read on to explore your options.

Key Takeaways:

  • Having a bad credit score typically means a history of missed or late payments, CCJs, high credit utilisation, or other evidence that may indicate a risk to lenders.
  • Each credit bureau (such as Experian, Equifax, and TransUnion) calculates credit scores differently. Take this into account when assessing your credit score.
  • Qualifying for a loan with a poor credit score can be challenging, but it is not impossible.
  • Expect higher interest rates, lower loan amounts approved, and stricter borrowing criteria.
  • Avoid predatory payday loans wherever possible – they rarely improve financial situations long term.
  • If you have multiple debts, many specialist providers offer consolidation loans for those with a poor credit score.
  • Rebuilding credit through diligent financial habits can help improve your chances of being approved for a loan.

What Level of Credit Score is Considered Bad Credit?

The main credit reference agencies (CRAs) in the UK are Experian, Equifax and TransUnion.

All three CRAs divide credit scores into 5 bands. For Experian and TransUnion, these are ‘very poor’, ‘poor’, ‘fair’, ‘good’ and ‘excellent’. Equifax is the exception: they categorise scores as ‘poor’, ‘fair’, ‘good’, ‘very good’ and ‘excellent’.

In general, any credit score falling below the ‘fair’ range is viewed as bad by most mainstream financial institutions.

‘Poor’ credit score ‘Very poor’ credit score
Equifax 0-438 -
Experian 561-720 0-560
TransUnion 601-660 300-600

Each CRA uses different metrics to calculate the number that represents your score, therefore you’ll have a different score with each agency. Before applying for a loan, such as a consolidation loan, make sure to check how your score ranks with at least one CRA.

What Causes Bad Credit Scores?

Some of the most common reasons everyday consumers end up falling into a bad credit score range include:

  • Having a history of missed or late payments on loans, credit cards or bills.
  • Having numerous credit accounts in arrears.
  • Accumulating numerous hard enquiries on your credit reports by frequently applying for finance.
  • Major adverse financial events in your past, like bankruptcy or CCJs.
  • Little or no credit history due to youth or general inactivity. No credit is often considered bad credit, as lenders have no way of assessing your risk as a borrower.
  • High revolving credit utilisation (i.e., regularly reaching or nearing your credit card limit).
  • Unpaid old collections accounts or debts being reported as delinquent or in default.
  • Incorrect information or errors on your report. This may be caused by several reasons, such as identity theft.
  • Failing to update the electoral register when you change your address.

Fortunately, past financial mistakes or struggles don’t doom you to terrible credit and difficulty with borrowing forever. Credit scores fluctuate and can be rebuilt with time and persistence.

Can I Get Approved for a Loan If I Have Bad Credit?

Being approved for a loan with bad credit is not impossible, but it might be more challenging. You may be limited in terms of the amount you can borrow and the interest rates available to you. Here are some things to consider.

01. Income and Affordability

Lenders approving applicants with bad credit want to see proof of steady verifiable income. This is because they’ll be relying on your ability to make repayments based on what you earn each month, rather than a good credit history.

Be prepared to provide recent pay slips, or tax returns, and bank account statements demonstrating reliable income flow. This is normally through consistent full-time employment or reliable government benefits like disability payments or pensions.

02. Higher than Average Interest Rates

Given the higher perceived risk of default assumed by the lender, prepare for interest rates to be higher if you have a bad credit score. This means the monthly repayments will be higher and/or the repayment term will be longer. You’ll repay more in total over the life of the loan.

It’s important to compare multiple lenders to find the best deals, especially if you have poor credit.

03. Smaller Personal Loan Amounts

Due to understandable default concerns when lending to those with subprime credit scores, most lenders will place a cap on the amount you can borrow – especially for new borrowers they haven’t worked with previously. This is because the more they lend you, the greater their risk of financial loss if you default.

Larger loans, including consolidation loans, typically become accessible after you build trust and history.

What Type of Loan Can I Get If I Have Poor Credit?

If you have a poor credit score, you may find it easier to access certain loan products than others. However, just because you might qualify for a particular loan, that doesn’t always mean it’s the right choice for you. It’s important to understand the terms and conditions and the risks involved.

01. Secured Loans

For applicants with bad credit scores seeking larger loan amounts over £5,000, lenders may insist that your loan is secured against collateral. This means tying the loan to a valuable asset, such as your home or your car.

You may find it easier to get a secured loan than an unsecured loan if you have a poor credit score. However, you risk your asset being seized if you don’t repay what you owe on time.

02. Guarantor Loans

For some loans for those with a bad credit score, lenders may allow you to provide a guarantor. This is someone (such as a family member or friend), typically with a higher credit score, who agrees to co-sign the loan.

While guarantor loans are often more accessible to those with poor credit, not all lenders offer them, and there are some risks. Your guarantor will take on full responsibility for repaying the loan if you don’t, and defaulting could affect their credit score as well as yours.

03. Payday Loans

Some payday loan companies specialise in ‘bad credit’ loans, offering even the riskiest borrowers a way to access quick funds in a pinch. Payday loans understandably appeal to those with bad credit because they market quick approval without being reliant on a positive repayment history.

However, payday loans often come with high interest rates and short repayment terms. You typically have to repay the entire loan within a few weeks, or risk fees and charges being added. This can lead to a ‘debt spiral’, where borrowers keep taking out larger and larger payday loans to repay the previous one.

04. Specialist Consolidation Loans

If you owe multiple unsecured debts – such as credit card and store cards, overdrafts, personal loans, and utility arrears – a consolidation loan may be one potential option to explore.

Consolidation means combining all your debts into one. You use the funds from the loan to repay each of your creditors in full, leaving you with only one loan to repay, often with a longer repayment term and more manageable monthly payments.

There are many specialist consolidation loan providers in the UK that work with individuals with a wide range of credit scores. While they are not the right option for everyone, and you may still be limited in terms of interest rates and borrowing amounts, a consolidation loan could help you rebuild your credit score and get back on track financially.

What's the Best Way to Get a Personal Loan With Bad Credit?

If you’re in need of a loan, but your poor credit score is putting you in a tricky position, the following tips may help increase your chances of success:

  • Shop rates and terms across different lenders to compare loan offers for similar products. Check the terms and conditions carefully and be wary of lenders advertising "guaranteed approvals".
  • Use comparison sites and/or loan brokers to explore a wide range of options from multiple banks, online lenders, and financial institutions at once.
  • Consider looking into specialist consolidation loan companies who work with people with poor credit scores.
  • Make use of ‘soft’ eligibility checks before applying for a loan. This will give you an idea of whether you’ll be approved and the rates you can expect.
  • Never take out a larger loan than necessary simply because you managed to qualify. Borrow only the amount you need. The more you borrow, the more you’ll repay in interest over time.
  • When applying, make sure all the personal details you provide are correct, and provide all documentation requested in full. This will help avoid delays and rejections based on errors or inadequate information.

Rationally think through your reasons for needing a loan, the costs involved, and the potential alternatives before borrowing money. Always ensure the lender is registered with the Financial Conduct Authority (FCA) so that you’re protected from unfair practices.

How Can I Start Rebuilding My Credit Score?

Above all, the healthiest path forward is focusing on pragmatically rebuilding and improving your credit score if past mishaps or inexperience has damaged this.

To improve your score, focus on maintaining perfect payment histories of all current and open credit accounts and loans moving forward. Avoid missed payments, if possible, through careful budgeting.

Try to keep your credit card utilisation below 30% and hold off on applying for any new finance or credit accounts in the short term unless absolutely necessary.

Check your credit report regularly and report any errors or inaccuracies, such as payments marked as late when they were paid on time.

Finally, have patience. Things like CCJs and missed payments will eventually disappear from your report usually after 6 years. Rebuilding scores takes diligent habits – it won’t happen overnight.

Explore Your Consolidation Loan Options Today

Bad credit can make accessing new finance much harder when funds are needed. Fortunately, though, you still have options. If you have a poor credit score and are struggling to balance multiple debts, Consolidation Expert could help.

We work with a wide network of lenders who specialise in offering consolidation loans for people with a poor credit score. Whether you’re looking to borrow £5,000 or £75,000, we can help match you with the best deal possible.

Apply online today to explore your options without harming your credit score. Don’t delay – let Consolidation Expert guide you on the path to financial freedom.

Representative 14.8% APR

We are a broker, not a lender.

Representative Example: Borrowing £15,000 over 60 months, repaying £355.28 per month, total repayable £21,316.57.

Total cost of credit £6,316.57.

Interest rate 14.8% (variable).

The lenders on our panel offer loans for 12-360 months, with rates from 4.7% APR to 42.6% APR.

The Representative Example is based on all loans paid out by lenders between 1st Jan 2022 and 31st Dec 2022.

Further reading

Read Is it Possible to Consolidate Short-Term Same Day Loans?
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Read Can I Consolidate Holiday Loans with Other Debts?
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Read How Can I Pay Off My Debts Faster?
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