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

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 you could explore 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 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

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Name	Product	Ratings	Finder rating	Customer rating	Total Payable	Monthly Repayment	Representative APR	Link
Novuna Personal Loan		Finder score ★★★★★ User survey ★★★★★	★★★★★ Expert analysis	★★★★★ User rating				Check eligibility View details	Representative example: Borrow £10,000.00 over 3 years at a rate of 7.4% p.a. (fixed). Representative APR 7.4% and total payable £11,142.00 in monthly repayments of £309.50.	Compare	loading Fetching your data...
My Community Bank Personal Loan		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				Check eligibility View details	Representative example: Borrow £5,000 over 48 months at a rate of 27.8% pa (fixed). Representative APR 27.3% and total payable £7,928.57 in monthly repayments of £165.18.	Compare	loading Fetching your data...
Fluro (formerly Lending Works) Personal Loan		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				Check eligibility View details	Representative example: Assumed borrowing of £7,500.00 over 48 months at 17.9% APR representative. Monthly cost of £214.79. Total amount repayable of £10,309.78. Interest rate of 16.6% p.a.(fixed) and total fees of £150.00. Available for loan amounts between £5,000 - £25,000.	Compare	loading Fetching your data...
Lendwise		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				View details	Compare	loading Fetching your data...
thinkmoney Personal Loan		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				View details	Compare	loading Fetching your data...
Tesco Bank Clubcard Personal Loan Finder Award		Finder score ★★★★★ User survey ★★★★★	★★★★★ Expert analysis	★★★★★ User rating				View details	Representative example: Borrow £10,000.00 over 3 years at a rate of 5.9% p.a. (fixed). Representative APR 5.9% and total payable £10,910.52 in monthly repayments of £303.07.	Compare	loading Fetching your data...
Tesco Bank Personal Loan Finder Award		Finder score ★★★★★ User survey ★★★★★	★★★★★ Expert analysis	★★★★★ User rating				View details	Representative example: Borrow £10,000.00 over 3 years at a rate of 6.3% p.a. (fixed). Representative APR 6.3% and total payable £10,972.08 in monthly repayments of £304.78.	Compare	loading Fetching your data...
Zopa Personal Loan		Finder score ★★★★★ User survey ★★★★★	★★★★★ Expert analysis	★★★★★ User rating				View details	Representative example: Borrow £1,500.00 over 3 years at a rate of 22.9% p.a. (fixed). Representative APR 22.9% and total payable £2,028.60 in monthly repayments of £56.35.	Compare	loading Fetching your data...
Barclays Existing Current Account Loan		Finder score ★★★★★ User survey ★★★★★	★★★★★ Expert analysis	★★★★★ User rating				View details	Representative example: Borrow £10,000.00 over 3 years at a rate of 9.9% p.a. (fixed). Representative APR 9.9% and total payable £11,527.92 in monthly repayments of £320.22.	Compare	loading Fetching your data...
Lloyds Bank Existing Customer Personal Loan		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				View details	Representative example: Borrow £10,000.00 over 3 years at a rate of 6.7% p.a. (fixed). Representative APR 6.7% and total payable £11,034.00 in monthly repayments of £306.50.	Compare	loading Fetching your data...
Plend personal loan		Finder score ★★★★★	★★★★★ Expert analysis	Not yet rated				View details	Representative example: Borrow £8,000 over 48 months at a rate of 16.66% p.a. (fixed). Representative APR 17.99% and total payable £11,013.12 in monthly repayments of £229.44.	Compare	loading Fetching your data...

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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

• Does being ill or disabled affect my chances of being approved for a loan?

  The fact you are ill or disabled shouldn’t have any impact on your chances of being approved for a loan. There’s no reason lenders should ask any questions about your health. If they do, they’re likely to be breaking discrimination laws.

  However, if your illness or disability affects your income, this will have a serious impact on your chance of being approved.

• Should I borrow money if my benefit payments are late?

  This isn’t recommended. You’re better off explaining the situation to the people or companies you owe money to. In this situation, you may be able to get a short-term advance from the Jobcentre or assistance from your local welfare scheme. Explore these options or the possibility of getting an interest-free Budgeting Loan from the Social Fund.

• I’m disabled. Should I borrow money to adapt my house?

  First, check if you’re eligible for a Disabled Facilities Grant. These are means-tested, unless you’re adapting a home for a child under 17. If you do borrow money for this purpose, you may be able to get government support for interest on these repayments.

Read about how different factors can affect your score