Whatever your financial circumstances, we all need to borrow money from time to time. However, with the imminent removal of the UK from Europe, banks and mainstream lenders are fussier than ever, so can you still get an unsecured loan if you have a less than perfect credit rating?
There are three main credit reference agencies, Experian, Equifax, and CallCredit who all have files on your credit history. Lenders consider many things when assessing your suitability for a loan, but your credit file is still the most important. Your file contains lots of information all relating to your financial history such as mortgage repayment history, credit card payment history and any other times that you may have held a secured or unsecured loan.
So when you apply for a loan, the lender will use the information on your credit file, as well as any other financial information, to establish your credit ‘score’. Each lender however is different and they have their own ways of calculating scores, so you could be successful with one bank even if you have been turned down by another. Thus your credit score is a guide for the lender as to how creditworthy and reliable you are. If you have head previous debt and always managed it well, then you should have no major issues arranging credit in the future. However if you have missed or late payments, or not paid off previous debts, this will be on your file and could seriously affect your credit score. If you have ever been issued with a County Court Judgement (CCJ) or been declared bankrupt, this can also have a detrimental effect on your credit score. Lenders are also wary about lending to ‘first time’ borrowers as well. These borrowers have no credit history to speak of as it is the first time they are lending money, so don’t be surprised if you find it difficult to borrow under these circumstances.
It is unlikely; if not impossible that anyone with a poor credit score will be able to borrow from a mainstream lender. However, there are a number of specialist lenders that are willing to offer unsecured loans to people with a low score, but at what cost? The answer is interest rates. You are deemed a higher risk if your credit score is poor, so the lenders interest rates will reflect this. Yes, there are lots of amazing deals offering record low interest rates, but this only need to apply to 51% of applicants, the rest will be on an interest rate that reflects their individual financial circumstance.
Trying to improve your credit score will always help the loans process. Ensure that you are registered on the electoral roll, and check your credit file to make sure it is accurate and up to date. Also, try to avoid making multiple and frequent applications for credit as this leaves a ‘footprint’ on your file that can make other lenders wary of lending to you. Should you be successful in obtaining an unsecured loan, then make sure you make your monthly payments, and this will demonstrate your ability to manage your debt. So, yes you can still get a loan if you have poor credit, it may be that you have to pay a higher rate of interest, but if you manage it correctly and pay on time, then this will help repair your poor credit score.