Do benefits affect your credit score?

So you’re on benefits, and worried they might be showing up on your credit report? Find out the truth about how benefits affect your credit score in our guide.

Updated

The fact you receive benefits won’t directly affect your credit score, although there are related issues that can indirectly affect your ability to be approved for a loan.

Will benefits be visible on my credit file?

Your credit file only details information about your borrowing history, payments to companies and debts. As such, there’s no reason for details of your benefit payments to appear there.

Will benefits affect my chances of getting a loan?

When considering your creditworthiness, lenders will explore your income to see whether you’ll be able to afford to repay a loan in a timely manner. Many people who are on benefits have a low income, perhaps due to disability or unemployment. As such, they might find it hard to be approved for a loan from traditional lenders.

For this group of people, it’s not the benefits themselves that are harming the chances of being approved for a loan; it’s the financial circumstances that made them eligible for benefits.

If you’re receiving benefits, but still have a decent income and a good credit history, there’s no reason these payments should affect your chances of getting a loan.

Make sure you check a lender’s minimum eligibility criteria before applying for a loan, as this will commonly be the minimum level of income needed to be approved for the product.

Tips

Do

  • Check your credit score before applying for a loan This will give you a good idea about what products you could be eligible for.
  • Search for the cheapest products using the finder.com comparison tables.
  • Check a lender’s minimum eligibility criteria and make sure you meet the criteria before applying.

Don’t

  • Worry about benefits affecting your creditworthiness. It’s your income and credit history that matter more.
  • Consider specialist loans for people on benefits if you have a good income. But be aware that these products tend to have incredibly high interest rates attached to them.

Can I get a loan if I have a low income?

There are certain loans that are designed for applicants with a poor credit history. These tend to allow more leeway when it comes to approving applicants with a low income, but they will still have a minimum income rule. Check the minimum eligibility criteria before applying for a loan, and make your own decision as to whether you can comfortably afford the repayments before accepting an offer.

Products worth exploring include:

  • Bad credit loans. These products are designed for people with poor credit ratings. The maximum amount you can borrow tends to be lower than for traditional personal loans, and the interest rate will be higher
    Bad credit personal loans.
  • Credit-builder credit cards. These credit cards have looser eligibility criteria and a lower credit limit, plus you can build your credit rating with every timely monthly repayment.
    Credit-builder credit cards
  • Payday loans. These short-term loans have the loosest eligibility criteria, but the rates are atrociously high, so these products should therefore only be considered as a last resort in an emergency. Payday loans shouldn’t be used to make up constant cash shortfalls.
    Payday and short-term instalment loans

Michael's loan application and his credit score

After his wife left him and he lost his job, Michael successfully applied for jobseeker’s allowance and housing benefit. Meanwhile, his wife, Denise began receiving child benefit for their children.

Michael applied for a loan to tide him over while he searched for a new job, but was turned down due to his low income. Denise, who was working, applied for a loan to fund a family holiday, and was approved.

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Table: sorted by representative APR, promoted deals first
Name Product Total Payable Monthly Repayment Representative APR Link
Lending Works Personal Loan
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Representative example: Borrow £10,000.00 over 3 years at a rate of 5.8% p.a. (fixed) with an application fee of £0.00. Representative APR 10.0% and total payable £11,543.40 in monthly repayments of £320.65.
Royal Bank of Scotland Existing Customer Personal Loan (specific eligibility criteria apply)
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View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.4% p.a. (fixed). Representative APR 3.4% and total payable £10,524.24 in monthly repayments of £292.34.
Hitachi Personal Finance Hitachi Personal Loan
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View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.9% p.a. (fixed). Representative APR 3.9% and total payable £10,601.64 in monthly repayments of £294.49.
Zopa Personal Loan
Check eligibility
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Representative example: Borrow £10,000.00 over 5 years at a rate of 8.8% p.a. (fixed) with an application fee of £240.00. Representative APR 9.9% and total payable £12,602.87 in monthly repayments of £210.05.
Post Office Money® Personal Loan
Check eligibility
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.3% p.a. (fixed). Representative APR 3.3% and total payable £10,509.12 in monthly repayments of £291.92.
AA Member Loan
Check eligibility
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.0% p.a. (fixed). Representative APR 3.0% and total payable £10,462.68 in monthly repayments of £290.63.
NatWest Existing Customer Personal Loan (specific eligibility criteria apply)
Go to site
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.4% p.a. (fixed). Representative APR 3.4% and total payable £10,524.24 in monthly repayments of £292.34.
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Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.

Late repayments can cause you serious money problems. See our debt help guides.

The bottom line

Receiving benefits has no impact on your creditworthiness. A low income does. There’s no point turning down benefits in order to increase the likelihood of being approved for a loan. This will actually harm your chances, as your income will be reduced.

Frequently asked questions

Read about how different factors can affect your score

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