Loans for Bad Credit
If you are looking for a loan, bad credit in your past can have a bearing on not only whether you will be able to borrow and how much, but also on the interest rate you may qualify for. Many of the UK’s biggest lenders refuse to lend to people with an impaired credit history, and many others apply tiered pricing structures, charging more interest to those they perceive to present a higher risk of non-payment or arrears.
How do I know if I have a bad credit history?
It’s important to understand how financial institutions reach decisions about whether to lend you money. Every lender has its own unique ‘credit scoring’ process — often this works by assigning a point score to the pieces of information you give when you apply, such as how long you have been at your current property, whether you have a permanent or temporary job, full or part time employment, and your age etc. All this information contributes towards a ‘score’ that helps the lender determine how risky it would be to lend to you, based on their experience of lending to customers with similar scores in the past.
In addition, most lenders contact one or more external credit reference agencies for details of your credit history. The three main agencies — Experian, Equifax and Callcredit — store details of your past credit applications, how much money you owe, and your payment history. Any arrears, late payments etc. will be recorded on your credit file. The lender will use this information alongside their own credit scoring system, to determine whether you qualify for a loan or other credit.
Chances are you already know broadly whether you have a good credit history or not, but rather than making assumptions it is easy to check this information for yourself. Each of the credit reference agencies can provide you with a copy of your credit file on payment of a small statutory fee (currently £2.00). This will let you see exactly what information is made available to financial institutions when you apply for credit, and give you an idea of whether lenders are likely to see you as a risky applicant.
Loans for people with a bad credit history
Although high street banks and building societies are traditionally wary of lending to people with a poor credit history, there are hundreds of lenders who will take your circumstances into account and look at lending solutions that are appropriate for your needs. Many of these companies trade online (either directly or through brokers) and you can find more information by searching for phrases such as ‘loan bad credit no guarantor’, ‘loan bad credit lender’ or ‘loan bad credit instant decision’.
When looking for a loan, bad credit history will affect the loan rate you are charged — as these represent a specialist segment of the lending market, they are invariably priced higher than equivalent loans from a bank or building society. However, if you do need to raise cash it can be good to know that when applying for a loan, bad credit history needn’t be an insurmountable barrier.
