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How To Get A Loan With Bad Credit?

How to get a loan with bad credit? That's a really good question because, among the great British public, there is a lot of genuine confusion and misunderstanding about what the term "bad credit" actually means.

That confusion is understandable because:

  • there are four main agencies all of which work out your credit score differently (more on that below) and
  • each lender attaches a different level of importance to what's on your credit score when making a decision on your request for a loan.

In this article, we look at:

  • the actual definition of "bad credit",
  • 6 ways to improve your score, and
  • why finance companies accept applications from borrowers whose credit history is less than perfect.

What is a credit score?

Credit scores, sometimes known as "credit ratings", are estimations - expressed as a number - on how creditworthy you are based upon the financial information in your credit file.

What is your current credit score?

To find out what your credit score is, you need to get in touch with the four main credit reference agencies. Click on the links below to get yours:

What's a good credit score?

Each credit reference agency uses their own methodology when working out borrowers' credit ratings. The top two gradings are "excellent" and "good" and, below, you'll see just how your score differs between agencies.

An excellent score is:

  • 961-999 points at Experian
  • 466-700 points at Equifax
  • 5 points at TransUnion

An good score is:

  • 881-960 points at Experian
  • 420-465 points at Equifax
  • 4 points at TransUnion

What's an average score?

An average score is:

  • 730-770 points at Experian
  • 380-419 points at Equifax
  • 3-4 points at TransUnion

What's a bad score?

A bad score is:

  • 516-720 points at Experian
  • 280-379 points at Equifax
  • 2 points at TransUnion

A poor score is:

  • 515 or fewer points at Experian
  • 279 or fewer points at Equifax
  • 1 point at TransUnion

Can I get a personal loan with a credit score of 500?

If you have a score of 500, the following credit reference agencies would consider your chances of being approved for a bad credit loan as:

  • High at Equifax
  • Good at Experian
  • TransUnion has a top score of 5

Please remember however that finance companies use more than just borrowers' credit scores when they're deciding whether they'll approve a loan or not.

6 ways to improve your credit score

You can improve your score in a number of different ways. It may take a few months for each of these actions to produce a positive result so it's best that you get started on them straight away:

  • Join the electoral register - being registered on the voters' roll is perhaps one of the most important things you can do
  • Mistakes on your file - mistakes are more common than you think and have featured in the news lately. If you spot an error, you can request that the credit reference agency puts it right.
  • Pay your bills when they're due - all late payments are recorded and, if there are too many of them, your score will likely suffer.
  • Do you need a "notice of disassociation"? - are other people dragging down your score? You can get in touch with each agency and ask that those people are removed from your file.
  • Check for fraud - criminals use people's real identities when carrying out thefts. Have they used yours?
  • Pay your debts down faster - the more debt available to you that you use, the lower your score. So, try and pay down those credit cards and that bank overdraft faster than you are at the moment.

Can you get a loan with poor credit?

It is possible to get a loan with poor credit, but the types of loans you may be approved for will be limited in number compared to those for people with better credit ratings. As you improve your score, more choices will open up to you.

The types of loans you might get approval for are:

Bad credit loans - 10 important terms you need to know

Poor credit loans have a terminology all of their own. When you're checking out which borrowing options may be available to you, use this guide to help you understand the terms used before you accept any offer from poor credit lenders (subject to status).

1. APR

Interest is what finance companies charge you for lending you their money - it's how they make their profit. The higher the interest rate, the more interest you'll pay back over the course of the loan.

Finance companies offer different interest rates to customers depending on the risk they perceive when agreeing to lend a particular customer money. The representative APR is the interest rate offered to at least 51% of your lender's customers.

2. Bad credit loan

A poor credit loan is a loan offered to someone with a poor credit score. The interest rate charged is higher on poor credit loans because of the higher risk that the loan might default.

3. Broker

Brokers, like Little Loans, introduce borrowers to finance companies. Brokers use their knowledge of each of their lender's ideal customers so that they can match lenders to the right borrowers.

4. Fees

Fees can refer to the following charges:

  • Introducer fee - fees charged by brokers to introduce borrowers to finance companies. Little Loans charges no fees for our service
  • Management fee - sometimes charged by a lender if you miss a repayment
  • Early settlement fee - sometimes charged if you overpay on a loan or settle it altogether ahead of schedule

5. Hard credit search

FCA-authorised and registered finance companies must perform a hard credit search on you when you make a complete application to them for finance - in fact, they're legally obliged to do so.

If there are too many hard searches on your credit file within a short space of time, it will negatively affect your score and make it more difficult to find lenders that would be happy to work with you.

6. Lender (finance companies)

A lender is a finance company which provides loans to consumers. It's the finance company which pays the money into and collects the repayments from your current account.

Finance companies often work with brokers - what brokers do is find the types of customers that the finance companies like to work with.

7. Monthly payments

For most bad credit loans, you make one repayment a month to your finance company for the length of time your loan is due to be paid back over. Some finance companies offer weekly or fortnightly repayment options.

8. Security (secured loans)

With a secured loan, you pledge an asset (sometimes called collateral) to a lender. The lender can then take possession of that asset if you're unable to pay back your secured loan.

An unsecured loan requires no collateral whatsoever. However, if you are a homeowner and you're unable to make your repayments or you default on your loan, in certain circumstances a lender may be able to put a charging order on your property.

9. Soft credit search

Lenders and other companies (including utility firms, Sky, mobile phone providers and others) use soft credit searches to provide them with an indication on whether your request for finance (or another product or service) is likely to be successful

Soft searches can only be seen by you and the company which carried out the search. They have no effect on your credit score.

10. Term

The "term" of a loan describes how long you'll be making repayments on your account. For the types of loan offered by Little Loans' panel of finance companies, the term is either:

  • 3 months, 6 months, or 12 months on loans between £100 and £1,000
  • 3-36 months on loans between £1,001 and £5,000

Where can I get a loan with bad credit?

How can you borrow money if you have bad credit? There are two options - you can apply for a bad credit loan either direct from a lender or through a broker.


You can apply for finance direct to a lender via their website.

You will only be considered for that lender's products and, for every full proposal you make, a hard credit search will be run. You'll normally receive your decision within a minute or two.


Brokers work with a panel of lenders. Your details are sent in turn to the finance companies most likely to say "yes" to your request. Each lender contacted runs a soft credit search on you.

You'll be redirected to the website of the first lender who replies positively. When you're there, fill in their application form to apply. The lender will then run a hard credit search on you before coming back to you with their decision.

Which is better for you?

It may take two minutes longer applying through a broker but, if you do:

  • your request may be considered by multiple lenders who will only run soft credit searches on you,
  • you will only be presented to lenders who have indicated to us that they would consider applications such as yours, and
  • only one hard credit search will be carried out - that means less impact on your credit score.

Which loan company is best for bad credit?

Before you contact any poor credit loan provider, please make sure that they're authorised and regulated by the Financial Conduct Authority.

It's difficult to compare between bad credit loan companies - each one of them caters for different types of borrower.

If you are made an offer by any company, make sure that you're happy with the terms and conditions and that the repayments are comfortably affordable.

Will Little Loans work with me if I have a poor credit history?

We can't guarantee to find you a loan, but we try very hard to find a lender for every customer who applies through us. Before you accept any loan offered, please make sure that you can meet each of the repayments in full and on time without causing you or your family any hardship.

Failure to keep up repayments on any loan you agree to will adversely affect your credit score.

StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice

Little Loans is authorised and regulated by the Financial Conduct Authority.

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Representative Example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28. Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. We’re a fully regulated and authorised credit broker and not a lender