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How can I Borrow Money with Bad Credit?

It can be difficult to borrow money if you have bad or poor credit. However, it is possible to borrow with bad credit. Read more to find out more.
A bad credit score and coins.

You might think there’s no way to get a loan if you have a poor credit history. But is that true? A bad credit rating isn’t the end of the world – we’re here to tell you why.

What is a credit rating?

A credit rating is an evaluation of your creditworthiness. They analyse your credit history and create a credit report that displays numerically how good you are with credit, aka borrowing money. It shows lenders whether they should loan to you. It can also tell them what loan amount might be suitable, and what repayment term might be best.

To put it in layman’s terms, it’s a breakdown of your financial situation for lenders to look at.

You can get a free credit report online – you just need to fill in a few personal details.

What is bad credit?

There are three main credit reference agencies (CRAs) in the UK. Even if you’re getting your credit report through a third party like Totally Money, the CRA will do the credit checks.

Credit reference agencies have different scoring systems, which could be confusing when checking your credit score.

So, we’re here to break it down for you:

Transunion Equifax Experian
0 - 500 Very Poor 0 - 438 Poor 300 - 579 Poor
551 - 565 Poor 439 - 530 Fair 580 - 669 Fair
566 - 603 Fair 531 - 670 Good 670 - 739 Good
604 - 627 Good 671 - 810 Very Good 740 - 799 Very Good
628 - 710 Excellent 811 - 1000 Excellent 800 - 850 Exceptional

(Please scroll sideways if you can't see the full table.)

These scores can be a good indication of whether you’ll be accepted for new credit or even a mortgage. Most of us don’t look at our credit scores until we’re thinking of borrowing money, but it’s important to check it every now and then so there are no nasty surprises later.

Why would I have bad credit?

Thumbs down and a bad credit score.

There are several reasons you might have bad credit:

  • You have no credit history
  • You have opened and closed several bank accounts in a short time
  • You have missed payments on loans or debts you owe
  • You are in arrears for rent or other bills
  • You've had multiple hard credit checks

A credit reference agency will check all these details when they pull up your credit report. If you’ve never taken out a loan, you might be surprised you have bad credit. Many of us assume our credit rating should be Excellent or at least Good if we’ve never defaulted on a payment, but that’s not true.

Why would I have bad credit because I have no credit history?

This is simply because lenders don’t know whether you’re likely to pay them back. You need to have proof you can repay debts to have a good credit history.

Taking out a credit card can be a good way to gain credit history without any big risks. Meeting credit card repayments should slowly but surely improve your credit score.

When would I have had a hard credit check?

A hard credit check or a hard inquiry happens when you apply for new credit, whether that’s a credit card, personal loan, or any other kind of credit.

It will stay on your credit file for two years, so it’s important to think carefully before starting the application process for any kind of new credit. Even if you close the account before you use it, the credit check will remain on your credit report.

Checking your credit report doesn’t count as a hard credit check.

What are bad credit loans?

Technically speaking, there is no such thing as bad credit loans. However, there are some loans that will accept people who have poor credit ratings. In the circumstance that someone with a bad credit rating is accepted for a loan they may find they may have a longer repayment schedule and higher interest rate. This is because the lender is taking a bigger risk, so they’ll want a higher return on their investment.

A bad credit score might make it more difficult to borrow money, but there are options out there if you feel confident you can meet the loan amount and repayment terms.

How can I get a bad credit loan?

Bad credit loans have a relatively straightforward application process. You need to apply in the same way you would apply for a regular loan – usually online or through your bank account.

The lender will look at your credit score and likely offer you loans for bad credit. Then you continue the application process as you normally would for a loan.

How can I get better rates and higher limits?

The simplest answer to getting better interest rates and higher credit limits on a loan is to have a better credit history. If you’re serious about getting better rates, it’s time to put in the work to improve your credit score.

One other way to get a loan with a better rate is to consider getting a guarantor loan, but they may still turn you down if you have very poor credit or your guarantor fails their credit check.

The easiest way to get a loan with bad credit is to accept a higher interest rate.

How to improve your credit score

An image of pound coins stacked next to a computer screen with a ascending graph on it

There are different ways to improve your credit score and usually the best way to improve it will depend on why you have poor credit in the first place. So, start by finding out the reason why you have bad credit.

Most credit reference agencies or third parties will give you a reasonable insight into why your credit record is what it is. It might not always be obvious straight away, especially if you don’t have numerous missed payments or loans.

Other red flags to look out for:

  • Open and closed bank accounts
  • No credit history
  • Hard credit checks

Once you’ve identified these, you can work on fixing them.

For example, if you have bad credit because you’ve opened and closed several bank accounts or credit cards in a short period, you need to make sure you wait before taking out more credit and avoid closing any accounts even if you don’t use them.

In fact, it’s better to leave unused bank accounts open as a longer credit history is better.

If you’re missing repayments to debts and that’s why your credit score is low, you might want to consider a debt consolidation loan.

A debt consolidation loan works by letting you borrow enough money to repay all your existing debts, that way you just make one monthly payment to your consolidation loan provider. You’ll only pay back what you can comfortably afford.

It can be a good way to pay back several personal loans if you’re struggling with bad credit, because they’ll always consider people with a poor credit history.

Keep in mind that all of these things take time – your credit score won’t improve overnight!

Why you should consider a loan with a higher rate

You should consider a loan with a higher rate if you have poor credit because it will be much easier to get one. This is when a bad credit loan could be a good idea.

A provider will always perform a credit check when you submit a loan application, so if you have bad credit, your loan options might be limited. Bad credit loans enable people to borrow money when other lenders may turn you away.

What is a Credit Union Loan?

If you’ve been searching for a bad credit loan with low interest rates, you might have come across credit union loans.

A credit union is co-operative – members put together their savings to provide each other with loans, charging a low interest rate.

A credit union loan is a loan provided by the members – usually the interest rate will be no more than 3%.

This can sound appealing but joining a credit union can be difficult. You need to find a union or create one with people who you know well or have something in common with, such as going to the same house of worship, working together or living in the same area.

An image of a hand pressing an apply button on a mobile phone screen.

How to manage your loan repayments

Managing loan repayments normally comes down to budget. With a proper, realistic, and honest budget, you should be able to better afford your loan repayments. However that’s not always the case – we understand that circumstances change and a loan you might once have been able to afford may be unaffordable now.

If you’re struggling to manage your loan repayments, it’s probably time to consider a debt solution, such as a debt consolidation loan.

A debt consolidation loan for bad credit is a good option to pay back several debts.

Debts you can consolidate include:

  • Personal loans
  • Payday loans
  • Store cards
  • Catalogue debts

In fact, you can include most kinds of unsecured personal loans.

If you’re looking for a debt consolidation loan for bad credit, complete our online application form.

Debt Consolidation Loans for Bad Credit
An advisor pointing to a screen displaying Rep APR.

APRs from 5.8% to 89.9%

We are a broker, not a lender.

Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

Secured Representative 11.7% APR

If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

Further reading

What are the Different Kinds of Unsecured Loans?

Understand what an unsecured loan is, and how best to use the different kinds of unsecured loans in 2023.

What are the Different Types of Secured Loans?

With so many different types of loans available, it can be difficult to know which is right for you. For more information on secured loans, read this expert article.

Persistent Debt – What Does it Mean for Your Credit?

Persistent debt can affect your credit rating for a significant time period. Read to find out more.