Trying to borrow money when you have a poor credit score can be nothing short of frustrating. The unfortunate reality is that many lenders see a bad credit score as too high a risk, meaning you will usually only be offered options with higher interest rates or struggle to find a lender at all.
But, even if getting access to credit is harder without a good credit history, thankfully, it is not impossible. In this guide, we cover the steps you can take to find a loan that suits your financial situation and start improving your credit history along the way.
When you apply for a loan, the general process that follows is that lenders will check your credit report (known as a credit check) to see how you managed money in the past and use that information to decide whether to give you credit.
If your report contains evidence of missed payments, you will likely have a low credit score that reflects this lack of financial discipline. This can make borrowing more difficult, but the good news for you is that this is not impossible and bad credit loans exist to cover this need for credit.
These loans are designed for people with a poor credit history and, as expected, they typically come with higher interest rates as they are usually “higher risk”. The most common types of bad credit loans are:
We are a direct lender and can offer what many see as a middle ground between traditional loans and credit cards, letting you apply online and giving you a credit limit that you can draw from as you need to. You will only pay interest on the amount you borrow and you have a degree of flexibility with your monthly payments, meaning you can manage your balance just as you would with a credit card.
This type of credit typically makes the most sense if you want to borrow money on a flexible basis and do not like the unpredictability of applying for multiple loans. You can also use a credit line account to build a better credit record over time (as long as you make your repayments on time and stay within your credit limit!).
Before you apply for a loan, it is best to first check your credit report with a UK credit reference agency and make sure all the details are actually correct. Also, check that you are registered on your local electoral roll, as the lender will often use this to confirm your address.
You may then want to compare loans for bad credit from different lenders, so you can see who offers the most reasonable interest rates and loan terms based on your situation.
Tip: Always read the small print! Some lenders have unexpected fees or are secretive about their high interest rates. We are not – you can find out about our interest rates here.
Nobody likes rejection, especially when you need your application to be accepted, whether you want to take out a personal loan to cover an emergency or a business loan to fund your latest venture.
To increase your chances of a successful loan application process, you may need to put in the effort to improve your credit score over time. That means paying your bills and existing debts on time and avoiding applying for too many loans in a short space of time. For any loans you do have, it is well worth setting up direct debits in your bank account to keep your monthly repayments on track.
If your score remains low, do not overthink your situation and give up before you even start. Try to apply for a smaller loan or a credit line, so you can show lenders that you are trustworthy and can manage money responsibly. Over time, that positive record will improve your credit rating and you will be able to access lower cost borrowing options.
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