Can You Get A Loan When You Have A Very Bad Credit Score?

A credit score is a significant number that a lender will look at in order to decide whether or not to sign off on your loan application. Undoubtedly, there is an outside chance of approval when your credit score is not up to snuff, but does that mean you cannot get the nod if your credit report is not stellar?

No, a lender will in no way give you the thumbs down straightaway after finding a poor credit score. Your credit score summarises your credit history, the amount of debt you owe, the amount you have paid and so on. As a majority of loans are unsecured, your lender does not have security to fall back on. The risk of loaning to you is quite high if your credit rating is very poor, but there is still a chance, although slim, to get the green light from your lender.

· Have an additional income source

If you have got a hike in your pay or you have a side gig, you are more likely to get approval for a loan. If an additional income source is not an option, you should try to prove sustainability.

Prove your lender that you have been in your employment for a long period of time and you have been getting a hike in your wages every year. You can get approval despite a bad credit score with a steady income source.

· A CCJ is bad

Even if you have a satisfied CCJ, you will not have a snowball’s chance in hell. It clearly shows that you made a default on your previous loans and that you were taken to court. A CCJ cannot drop off your credit report until the next six years after its recorded date.

Your credit score cannot be good even if you manage to avoid having a CCJ appearing on your credit report. A few direct lenders are still out there that might entertain your application, especially if you are looking for emergency loans for bad credit, but you will be charged very high-interest rates.

Beware of borrowing money when your credit score is too bad, as you might get trapped in your debt, and as a result, your credit points will go further down. This will kill all your chances of qualifying for a loan down the line.

· You have a guarantor or co-applicant

As your credit score is too bad, your lender will not be willing to give the green light to your application. Arrange a guarantor or a co-applicant. A guarantor or a co-applicant must have a good credit score and a steady income source.

This will lower the risk involved in lending you money, as your lender can call up on the guarantor or co-applicant to pay off the debt when you make a default. However, remember that this facility is mainly available for personal loans.

Really bad credit loans from direct lenders are very small loans, so a lender will never ask you to arrange a guarantor. Unlike personal loans, the maximum amount of these loans cannot be more than £1,000 and they are paid back in full on the due date.

· Borrow little money

Even if there is a scope for borrowing up to £1,000, it does not mean that a lender will lend you this much money. You should carefully analyse your repaying capacity before applying for a loan as this will serve the basis for a lender to decide the loan amount.

Use an online calculator to see how much you will end up paying when interest is added to what you borrow. It is always suggested that you borrow as little money as possible. Interest rates will be quite higher due to a very poor credit rating, so it makes sense to restrict your borrowing amount. This will reduce the risk on part of a lender.

· Put some gap and in the interim do up your credit rating

When your credit score is very poor, you should put some gap in borrowing. The impact of previous defaults will not be extreme if they are old. In the interim, try to do up your credit rating.

· Use your credit card smartly and pay off bills on time. This will help make your credit file better.

· You should also keep your credit utilisation ratio low.

· Increase your income and try to rely on cash for your expenses as much as possible, so you can show you do not excessively rely on loans for your expenses.

· Build an emergency cushion for a rainy day. This will prevent you from borrowing money.

The final comment

You can get a loan when your credit score is very bad but chances are bleak. Further, interest rates will be very high. Be careful of your repaying capacity.