Can I Get a Loan With Bad Credit?
If your credit score is far from perfect, you’re likely to find it trickier to get a loan – but there could still be some good options for you.
You know you’ve got bad credit – but you would really like to get a loan: maybe to get a new car, or to help fund some much-needed home improvements. Firstly, it’s useful to know what information is recorded on your credit score. Each credit score agency will hold slightly different information about you, but some general information is usually included.
What information is on my credit file?
- Basic details, like you name, address and date of birth.
- Applications for credit that you’ve made.
- Any financial links you have to other people – e.g. a joint loan.
- If you’ve been late on payments, or worse still, failed to make some payments completely.
- How much you owe to lenders.
- County Court Judgments (CCJs) against you that are not paid in full within one month of receiving the notice (paying within a month can sometimes mean they’re not added on).
- If you’re on the electoral register at your current address.
- If you’ve declared bankruptcy or have had an IVA (Individual Voluntary Arrangement).
You might have applied for a few loans, only to have been met with decline after decline – which can be really stressful, and can also further increase your bad credit history, as lenders don’t like to see lots of applications on a file.
What can I do if I’ve had a CCJ?
A County Court Judgment (CCJ) is a type of court order in England, Wales and Northern Ireland that might be registered against you if you don’t repay loans or credit cards you have. Each CCJ will have individual instructions that it’s really important you follow.
Sticking to the instructions, and paying off any money at the dates you’re asked to is vital – if you don’t you could face bailiffs and / or having to go to court.
Some lenders will still lend to you if you’ve had a CCJ in the past, and if you meet all the terms of your CCJ agreement, in six years it’ll be removed from your credit file altogether.
But if you’ve not had a CCJ, you might be unsure about why you’ve got bad credit in the first place.
Why might I have bad credit?
- You’ve failed to make payments on time.
- You’re financially linked to someone who has failed to meet payments.
- You’ve written off debts with an Individual Voluntary Arrangement (IVA).
- You’ve filed for bankruptcy.
A good idea for everyone, and especially if you know you’ve got bad credit, is to think about ways to improve your credit score, to make you more appealing to lenders in the future. This can take time, as most negative marks stay on your credit file for six years, but there are still some really positive strides you can begin to make to build up a better picture of yourself to lenders.
How can I improve my credit score?
- Make payments on time – for all credit cards, loans, mortgage payments, and bills.
- Check you’re on the electoral roll – if your name isn’t on there you’ll find it harder to get credit.
- Avoid CCJs – if you’re having problems meeting payments, make sure you get some debt advice, there’s plenty of help online.
- Try not to apply for too many loans or credit cards – too many applications damages your score, using a service like Better Chance Finance can mean exploring which lenders are more likely to say “yes” before applying, and so there’s less of an impact on your score.
- Make sure there are no mistakes on your file – sometimes mistakes can happen, so go through each item on there.
These are important steps for everyone to keep in mind, but if you want to get a loan soon, and you know you’ve got a bad credit rating, there are some options to explore.
I want a loan – but I’ve got bad credit – what are my options?
Use a company like us – at Better Chance Finance, we just ask you to fill out one simple application form, and we find the lender who is likely to give you a better chance at a “Yes” to finance.
Positives – saving you time, stress, and better for your credit score – just doing one application can be an all-round better way.
Negatives – some people like to know exactly where their application is going to, and only want to borrow from certain lenders.
Get a secured loan – this loan type is popular with people with bad credit, as even if you do have a CCJ, or have filed for an IVA, lenders can feel more comfortable lending to you if you’ve got an asset such as a home that you could sell off to pay the debt, if you weren’t making your payments.
Positives – a secured loan is usually easier to get even with bad credit, and you can borrow more too – sometimes up to £500,000.
Negatives – if you fail to make payments, you could have your home repossessed – any money from the sale will have to go to pay the mortgage and any other debts you need to pay.
Find a guarantor loan – for this, you’ll need to find another person who’s prepared to say they’ll make your repayments if you fail to pay them. It’s better if your guarantor has a really good credit score, so ideally with no CCJs or IVAs in the last six years.
Positives – this can give you a really good chance at a loan that would be otherwise not an option for you.
Negatives – asking someone to be your guarantor can be a sensitive question, as they’ll be responsible for making the payments if you don’t. So, it’ll need to be someone who trusts you, and knows you won’t let them or the lender down.
Look into peer-to-peer loans – peer-to-peer lending (P2P) is a way that people lend money to individuals or businesses, usually through an online service. The lender gets interest on the money they lend. There are P2P websites that specialise in bringing together people and businesses who want to lend and borrow.
Positives – cutting out the banks can sometimes mean surprisingly affordable rates, and you won’t have to put an asset against the loan.
Negatives – The worse your credit score is, the more these loans will cost. And many borrowers feel safer with the more usual path of going directly to a broker or lender.
What are my first steps for getting a loan with bad credit?
So if you know you want a loan, start by finding your credit report to see how bad your credit score is. There are three credit reference agencies, Equifax, Experian and TransUnion, and they all hold information on you. When you find your report:
- Check addresses on old accounts, make sure you’ve not missed any.
- Make sure everything on there is accurate, mistakes can sometimes happen.
- Check that any CCJs or IVAs listed are accurate and correct.
- Cancel unused credit and store cards as even unused cards can count against you.
- Apply for a loan with a broker – consider using a service like Better Chance Finance as we’ll help find a lender likely to say “Yes”, whatever your credit history.