Borrowing Money With a Bad or No Credit Rating

There are many reasons why you might have a poor credit rating. Perhaps you ran into financial trouble in the past, or you could simply have no credit rating yet because you’ve never borrowed money before. Either way, both scenarios can stand in your way if you’re trying to get a loan. The good news is that having bad or no credit doesn’t mean that it’s impossible for you to borrow money. Here’s what to do.

Understand your credit rating:

Understanding your credit rating better will help you figure out exactly what’s holding you back from getting credit. You can use a free service like ClearScore to look at your credit report and find out what creditors are seeing when you apply for a loan. You can also take this opportunity to look for any errors on your credit file - for example, if there are missed payments listed that you know you made - and have them taken off.

Understand your current level of debt:

If you are already in quite a lot of debt then this will undoubtedly affect your ability to get credit, even if you’ve always made repayments on time and your credit score itself isn’t low. Lenders will look at the amount of debt that you are already paying off when they make a decision - and the more debt you are currently in, the harder they will deem it to be for you to continue making repayments with another loan included. The best thing to do is to pay down some of your existing debts or try to apply for a smaller loan.

Try a bad credit loan:

There are some options that you might want to consider for getting a loan with bad credit. A guarantor loan, for example, is more likely to get accepted as you will have somebody else acting as a guarantor - this person will need to cover repayments if you cannot. Peer to peer loans are another option, or you can look for short-term unsecured loans like these payday loans, which lenders usually approve based on your income and expenditure rather than solely on your credit rating.

Try a smaller line of credit:

If your issues are because you don’t have a credit rating due to never borrowing before, then it’s a good idea to get a smaller line of credit, such as a credit building credit card or even a cheap smartphone contract before you try and apply for anything larger. Don’t forget that your utility bills will also count towards your credit rating, so if you pay for things like the gas and electric, water or broadband at home, then make sure that you always make payments on time.

Use an eligibility check:

Finally, bear in mind that being rejected for credit can have a temporary effect on your credit rating for a few weeks and make it harder for you to be accepted during that time. So, try to use eligibility checker tools before applying - these will let you know your likelihood of being accepted without affecting your credit score.

Getting a loan with a bad credit rating or no credit rating isn’t impossible when you know where to look.