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.
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 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 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. Short term loans
Example: 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.
* This is a fictional, but realistic, example.
Bottom line
Whilst receiving benefits has no impact on your credit file, having a low income will affect your creditworthiness when applying for credit. 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.
Finder survey: How important do Brits think it is to have a credit score?
Response
Very important
44.09%
Quite important
38.37%
Not that important
10.27%
Not important at all
3.68%
I don't know what a credit score is
3.59%
Source: Finder survey by Censuswide of Brits, December 2023
Frequently asked questions
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.
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.
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
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To make sure you get accurate and helpful information, this guide has been edited by Joelle Grubb as part of our fact-checking process.
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
Chris's expertise
Chris has written 612 Finder guides across topics including:
Learn the facts about loan applications and your credit score plus what you can do to minimise the impact.
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