Can I get a Loan with Bad Credit?
If you have a bad credit rating (or perhaps very little credit history due to your age or never having needed a loan) then you might be wondering whether it is possible to successfully apply for a loan.
The short answer is yes.
The long answer is probably, but it depends, and you might have to do more than other applicants to be accepted.
When you apply for a loan of any sort – a car loan, a personal loan, even a credit card – the lender will want to look at your history and current status to try and work out whether you’ll be apply to keep up with your repayments.
There are many things that can cause you to have a negative credit rating or make lenders view you as a risk, and understanding these is your first step to improving your chances of being approved for a loan.
1. One of the main reasons for a poor credit score is if you have defaulted on previous debts or have missed many payments. If this is the case with you, finance companies will worry that they will not get back the money they lend to you so you need to take steps to make yourself a more attractive prospect. Pay off as many missed payments as you can. If you are trying to buy a car on a finance plan, you should also try and save up a deposit as this will increase your chances of being accepted and mean that you have to borrow less.
2. If you have moved around a lot in recent years you will have many addresses listed on your credit report, and lenders will probably view you as unreliable. They like to see a steady history and some stability in your life. If this is the case with you you might need to delay your application, say by about 6 months to build up time at your current address. Also, make sure you register to vote at your current address and that all your accounts (phone, cards etc) are registered there as well.
3. If you are young or you have never used credit before then you won’t have much of a credit history, and this can count against you as lenders won’t be able to judge you. You can improve this by getting a phone in your name, or a store card or other small bit of credit. This will help you to build up your credit history so lenders you can track how efficiennt you have been by paying back your debts.
Depending on the type of loan you’re looking for, there might be other stipulations as well. For example, you might need a property to secure the loan against, or if you’re looking for a car credit deal there might be certain requirements about the type of driving license you have or the car you’re buying.
Your chance or being approved or rejected for finance will also depend on other factors such as the deposit you are willing to put down, the total amount you are borrowing, the term of the payment and if you are taking out a personal loan or purchasing an asset which offers security to the lender.
There are some lenders who will just never consider applications from those with bad credit, but luckily there are others who will consider all different types of circumstances and make a judgement based on things like your current income and circumstances. If you’re really struggling it can help to make a joint application or get someone to guarantor your loan, but this can be risky for both of you so consider it carefully.