If you are among the one in four of the adult population in the UK who has experienced some form of bad credit history during their lifetime, you may find some banks and building societies are unwilling to risk lending money to you. Lenders have become progressively pickier since the start of the economic problems back in 2007. Research undertaken by credit card provider Aqua and published in November 2012, reveals that 57% of adults in the UK, which is more than 25 million people are at risk from being refused credit by mainstream lenders and will be forced to apply elsewhere.
But there are a select number of loan providers who do provide loans for people with a poor credit rating - without charging exorbitant rates in the process. Use the search facility above to find the best loans for people with bad credit.
The range of poor credit loans available and the interest rate will depend on how bad your credit history is and whether you are a homeowner or a tenant.
A bad credit history can be defined as an individual who has experienced debt problems in the past, perhaps running up mortgage arrears, defaulting on a loan or taking too long to pay back debt. This may have resulted in CCJs being registered against them or, in more serious circumstances, IVA or bankruptcy procedures.
However, it is possible to get a poor credit rating in other ways. For instance, if you are new to credit and donít have any previous history of borrowing, lenders canít assess your ability to repay debt because there is no track record to judge you on. Also if your name doesnít appear on the Electoral Register, lenders may be concerned about your identity.
Acquiring a bad credit history is easier than most people think. All it takes is for your personal finances to go slightly awry. The consequence of such financial negligence is most high street lenders won't touch you, however a specialist sub prime lender may be able to help, although the repayments are normally higher when compared with borrowing from a high street bank.
When determining whether to accept your application and what interest rate to charge, a lender will scrutinise your financial history. This is done through credit scoring and checking your credit file.
When you apply for a loan, lenders will usually assess your creditworthiness by a process known as credit scoring. You will be awarded points dependent on information captured on the application form. For example, occupation, age, marital status etc are factors taken into consideration. Your credit score will firstly determine Whether or not your application for a loan is granted and secondly, if your application is successful, what interest rate you will be charged.
Credit Reference Agencies
In addition to a credit score, a lender will undertake a Credit Reference Search to check your credit file once you submit a loan application.
These agencies hold details on just about every UK adult.
The information they hold on is:
1. Public record information such as the UK electoral roll, County Court Judgements (CCJs), records of bankruptcies and repossession orders etc.
2. Credit account information. This is information shared by banks about their customers. This provides details about current loans, credit cards and other finance agreements that a person has in place. It enables a lender to checking if a person is up to date with their payments and for seeing what other borrowings they may hold.
3. Search Information. This records credit checks carried out by lenders. It will be flagged up if you have had an abnormal number of credit checks carried out in a short space of time, as this could indicate that you are over committed with debt or that fraudulent applications have been made.
The final decision the lender makes may not entirely be based on your credit score alone. If you score above the lenderís Ďpass-markí it will usually mean your application for a loan will the accepted. If you have a score below this mark it will mean you are more likely to be turned down.
However, different lenders have different systems and pass marks, so being turned down by one lender doesn't necessarily mean you'll be turned down by another.
Having a history of late payments, CCJs, arrears, defaults, bankruptcy, or other credit problems will inevitably mean you're choice of loans is restricted. Nevertheless, there are lenders who specialise in lending to people with adverse credit history.
Find lenders offering bad credit loans
Use the 'Compare Loans' tool above and select 'Yes' to Any bad credit history? to see which lenders may be able to provide you with a loan. Check what deals are available.