Poor Credit History

Bad credit history? Here’s what you can do

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Having a bad credit history can really get in the way when it comes to getting the loan you want. Your credit rating is arguably the most important aspect lenders look at when deciding whether or not to approve you for a loan.

If you have made some missteps in managing your money in the past or if you have simply never taken out credit before it can be difficult to find a loan provider willing to work with you. That’s where we come in.

At 786 Loans, we’re not lenders. We are credit brokers. What this means is that we help borrowers like you to find the most suitable and best priced financial products available to you on the market. So if you have a bad credit history and if you are looking to take out a loan, we’re here to help.

In this article, the 786 Loans team looks at what is considered bad credit, how lenders will feel about your application, the types of credit that may be available to you, and what you can do next.

What is a bad credit?

Whenever you apply to borrow money, loan providers will pull up your credit report before they’ll agree to lend to you. This is a file that records how you’ve done in the past with borrowing money and paying it back.

It lets lenders know how much money you’ve borrowed, whether you paid it back, and if you paid it back on time. A bad credit history suggests you have struggled to manage your debts in the past and this raises red flags for all potential lenders considering your loan applications.

You may have accumulated a bad credit history for a number of reasons, such as if:

  • You failed to make monthly repayments on time (including loans, bills, mortgages, rent payments, and more),
  • You missed repayments altogether,
  • You have been declared bankrupt,
  • You have entered into an Individual Voluntary Arrangement (IVA), or
  • You have had a County Court Judgement (CCJ) made against you.

While bad credit history can make it difficult to secure a loan, it is not impossible. High Street lenders won’t automatically close the door on you but they may want to renegotiate their terms before they’ll offer you any credit.

Types of loans you’re likely to be approved for

If you have bad credit, you won’t be able to apply for what are known as ‘best buy’ loans. These cheap loans tend to have slightly more attractive terms and rates than others on the market but they are usually reserved for those with clean credit histories.

But don’t despair. Many of the UK’s top lenders offer specially designed ‘bad credit loans’ for those with poor credit histories.

In most cases, your options will be limited on the types loans you can take out and it is likely you’ll pay higher interest rates than if your credit history was better.

This is to reduce the risk to the lender if they advance you the money. No matter what your individual circumstances, a less than perfect credit history suggests there is a slightly higher chance the lender will not get their money back should they lend to you.

These slightly higher interest rates for bad credit loans help reassure the lender they will not be left out of pocket – meaning you have a better chance of still being accepted for credit.

The greater risk your chosen lender perceives you to be, the more interest you’re likely to pay. However, it is important to note that (while important) your credit history isn’t the only aspect of your application that loan providers will consider.

Lenders will look more favourably on you if you have a secure job and a regular salary. They may also look at certain assets you own, such as your home, as a sign of overall financial stability.

Bad credit loans: What you need to know

As with most loans on the market, bad credit loans come in two forms: either secured or unsecured. Secured loans tend to be easier to access for those with bad credit. These loans use something valuable you own, like your house or car, as collateral for the debt.

Should you be unable to make your repayments then the lender will be able to recover the remainder of the money they’re owed by repossessing the asset. This means the risk to the lender is reduced even further.

While secured loans may be risky to you as the borrower, if you have bad credit and are certain you can make the repayments, a secured loan could be much easier to be accepted for.

However, that doesn’t mean that it’s right for you. You may need your car for work and a logbook loan would take your car as security before lending you the money. However, if they took your car away because you couldn’t make repayments, you’d lose your job too.

Please think very carefully before taking out a secured loan. There are some slight advantages to secured loans because they charge interest but the disadvantages to failing to repay your loan can be severe in comparison to an unsecured loan.

How can you improve your credit history?

As you can see, a bad credit history can hold you back when it comes to applying for some forms of credit from some types of financial institutions. If you have a poor credit history or no credit history at all, establishing and improving your reputation as a borrower is the first step towards better lending opportunities in the future.

Good credit histories open the door to more borrowing options, better interest rates, and more favourable loan terms in the long run. There are a number of simple steps you can take to start improving your credit score today.

This could be as simple as putting your name on the electoral roll. This works by proving to lenders that you are who you say you are and that all of the details you have provided are accurate; making them feel more confident about lending to you.

Other methods of boosting your credit history involve responsible borrowing. Whenever you are looking to access credit it is important that you don’t apply for multiple loans too close together.

All loan applications show up on your credit score – even the failed ones. Too many loan applications in a short space of time suggest to lenders that you are struggling to manage your finances and may be relying on new loans to pay off old debts.

On top of this, when lenders see that others have rejected you it can make them hesitant to lend you money themselves; leading to even more failed loan applications. This is where a loan broker like 786 Loans comes in handy.

Using our clever online system, you can compare top bad credit loan providers from across the UK. Simply input your details and we will help you find the lenders most likely to accept you for credit with no wasted applications or any further damage to your credit history.

A loan for ‘bad credit’ could even improve your credit rating

When you have a bad credit history, you may think that borrowing even more money will worsen the problem at hand. But this simply isn’t always true.

To improve your reputation as a borrower, you will have to actually (you guessed it!) borrow money. If you take out a loan for bad credit then proceed to make all your payments in full and on time then you show potential lenders that you are capable of managing credit.

Once lenders see you can borrow responsibly and that you can be trusted to pay back your debt it is likely you’ll be able to access other, more attractive, forms of credit. Should you need to take out a loan again you might be able to do so at a much lower rate of interest.

Please bear in mind that if you take out a loan for bad credit and you miss your repayments then this will have a negative impact on your credit score; even more so than if you failed to repay a standard loan.

If you plan on taking out a loan for bad credit, please do make absolutely sure that you can definitely meet your repayments.

Find the best ‘bad credit’ loans with 786 Loans

At 786 Loans, we help customers with bad credit find their perfect loans every day. Whether you’re looking for a loan you’re likely to be accepted for or you are trying to improve your credit rating, we can help you find the best lender to suit your needs.

We’re a broker, not a lender, so it’s not us you’ll be borrowing money from. We have a panel of lenders (all Financial Conduct Authority-approved, just like 786 Loans) and all of them have their own specific type of borrower that they like to work with. We’ll match the details that you give us on your application and that are on your credit report with the information our lenders give us on the types of customers they’re most likely to lend money to. That way, you’re assured of the cheapest loan on the most attractive terms.

To find bad credit loan deals from some of the UK’s top payday loan and short-term loan providers, apply with 786 Loans today.

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