Trying to get a loan with a poor credit history can be deflating, as the best deals are often reserved for those with spotless credit histories.
But, don’t despair, as there may still be options open to you.
Furthermore, providing you’re a responsible borrower and make all your repayments on time, taking out a loan could actually help to improve your credit score.
The options that might be open to you
Some lenders specialise in loans for people with less than perfect credit histories. The interest rates offered are typically higher than you would find in the deals reserved for those with the best credit record, but they are usually available to a wider range of people.
Check your eligibility first
Some comparison websites allow you to search for loans that are available for people with good, average and poor credit histories. This can help you get a feel for the type of product and interest rate that might be available to you.
If you’ve already been rejected by one or more lenders it is important not to make too many more applications. In most cases each application you make will leave a record on your credit history, which may make it harder to be accepted for credit. Some loan providers, including Ocean, will give you a decision based on a “soft search” of your credit history, which doesn’t show to other lenders. Only if they accept you, and you decide to go ahead, will a hard search be recorded.
If you’re a homeowner and are looking to borrow between £10,000 and £150,000 then you might want to consider a homeowner loan. If you do have a less than perfect credit history then you may have more success applying for a homeowner loan than a personal loan because the lender will be reassured they have some security should you fail to repay. However you must remember that a homeowner loan is secured against your property so failing to make the repayments could result in you losing your home.
Things to remember
Taking out any sort of credit is a big responsibility, so before you apply you need to make sure you’ll comfortably be able to make the monthly repayments. Sit down with your bank statements and look at your income and outgoings to see how much money you have spare each month to put towards paying back your loan. Try to be realistic and don’t try to borrow more than you could reasonably afford to repay.
Should you fall behind on your payments, you could further damage your credit history, and doing this could seriously affect your chances of being accepted for any credit in the future.
Checking your credit score
It’s a good idea to check your credit history before you consider applying for any form of credit. You can use websites like Experian, Equifax or Callcredit’s free site Noddle to review your credit history and get any errors fixed.
Other things you can do to improve your credit history include ensuring you’re signed up to the electoral register and that you make any payments (like gym memberships, utility bills and mobile phone contracts) on time.
It’s wise to keep an eye on your credit report and check on it regularly to make sure everything is in order.
What are the reasons behind your poor credit history?
Considering the reasons behind your damaged credit history is a smart move. You may have just missed a few payments in the past, like your mobile phone contract. In this case, you could be able to take out a loan and in turn improve your credit score over time – providing you make your repayments in full and on time.
On the other hand, if you’ve got a lot of debt already, taking on more at the moment isn’t a great idea. You could find you struggle to repay and end up in a really difficult situation if you take on more when your finances are already stretched.
If you’re struggling with debt, you may wish to contact the Money Advice Service for confidential help. To find out more click here >
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Disclaimer: All information and links are correct at the time of publishing.