Don’t let a “fair” credit score stop you from getting the funding you need. Compare realistic lenders that don’t expect a perfect credit history.
For most of us, big-ticket expenditures like a car, wedding or holiday very often can’t be paid for upfront. So, being practical is incredibly important – and even more so if you’ve been declined for a loan in the past.
If you’re looking for a loan and have your credit rating in mind, you’re already ahead of the curve. By taking into account what kind of loan your credit score can get you, you’re setting yourself up for success. Interest rates, terms, requirements and whether you can even get approved are all affected by your perceived creditworthiness. By considering it, you’re setting up realistic goals for repayments. This guide will take you through what to expect when you’re looking for a fair credit loan.
What is a fair credit score?
There is no single, definitive credit score that’s defined as “fair”. Each Credit Reference Agency (CRA) uses a different scale. Lenders will normally check with one or more of these agencies when assessing your application for credit. Even though these bureaus collect the same information to determine your credit score, there’s enough variance in their algorithms to result in different scores among them.These are the scoring ranges employed by the main UK CRAs. The higher the number, the better the score.
- Experian: 0-999
- Equifax: 0-700
- TransUnion (formerly Callcredit): 0-710
Depending on your score, you’re said to have excellent, good, fair, poor or very poor credit:
| Agency | Score | Rating |
|---|---|---|
| Experian | 0-560 561-720 721-880 881-960 961-999 | Very poor Poor Fair Good Excellent |
| Equifax | 0-279 280-379 380-419 420-465 466-700 | Very poor Poor Fair Good Excellent |
| TransUnion (formerly Callcredit) | 0-550 551-565 566-603 604-627 628-710 | 1: Very poor 2: Poor 3: Fair 4: Good 5: Excellent |
Having a decent credit score will make it easier to get approved for personal loans, mortgages, vehicle finance and credit cards. It’s also likely to have a bearing on the credit limits and interest rates that you’re offered by lenders (which can vary at the lender’s discretion).
Calculate the cost of loans for fair credit
You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Warning: late repayments can cause you serious money problems. See our debt help guides.
How does my credit score affect my application?
The lowest rates on the market – and therefore the cheapest loans – are reserved for those with excellent credit. Applicants with fair credit may be offered personalised (higher) rates or may need to apply to specialist lenders.
Crucially, when lenders advertise their Representative APR, in most cases this is not the rate that they award to all successful applicants. Up to 49% of successful applicants may receive a higher rate. This is known as “risk-based pricing“.
While your credit score isn’t the only factor considered, it’s widely used to determine your interest rate, the maximum amount you can borrow and your odds of getting the loan in the first place.
Though your perceived risk may vary from lender to lender, they’ll all try to determine how well you’re meeting your financial obligations. The better you are at meeting your financial obligations, the less risk you’ll pose to a lender. On the other hand, if you’ve struggled to pay your bills on time or have missed payments in the past, the rates you’re offered will most likely be “sub-prime”.
Loan companies must only practice responsible lending, which means that they should also consider factors like your income and outgoings so that they don’t offer loans likely to lead to financial difficulty.
What types of loans are available to those with a fair credit score?
Repairing your credit score can take time, but you do have loan options now if your credit is sitting at “fair”.
- Personal loans. Fixed-rate, unsecured instalment loans are repaid monthly payments and aren’t secured against any property. This kind of loan is available from high street banks, online direct lenders and brokers, with many lenders catering to those whose credit histories may be less than perfect.
- Guarantor loans. Guarantor loans require a friend or relative of the borrower (who will need to have good credit) to promise to step forward in the event that the borrower defaults on the loan.
- Credit builder credit cards. Credit building cards are designed as “stepping stone” products to cards or loans with better rates. By reporting back to CRAs that you are borrowing responsibly, they can help you to build or rebuild a positive credit history.
- Car finance. Car loans take various forms, and because some forms use your vehicle as security, lenders can be less exposed to risk and can be more inclined to lend.
- Logbook loans. These loans are usually considered short-term loans because they are meant to be repaid quickly. Interest rates are high, and if you fail to repay on time, you stand to lose your vehicle.
- High-cost, short term loans. Short term loans, including payday loans, can be paid back in a few days or on your next payday, but they typically come with some of the highest interest rates around. They are usually given in smaller monetary amounts of up to £1,000, over terms ranging from a few days up to 12 months.
Borrow up to £10,000 within 24 hours with a guarantor
If a limited credit record is holding you back from the money you need, a guarantor loan can be a great option, allowing you to borrow money while building your credit score.
- Amigo loans will not judge you based on your credit score.
- Loans of £500-£10,000 over 1-5 years.
- Loans normally paid out within 24 hours of the guarantor being accepted.
Representative example: Borrow £5,000.00 over 3 years at a rate of 49.9% p.a. (fixed). Representative APR 49.9% and total payable £8,782.92 in monthly repayments of £243.97.
How do I compare my loan options if I have a fair credit score?
A fair credit score can limit your options slightly. Not all lenders will be willing to fund you, and others might not give you their best loans. Here’s what you should look for when comparing lenders:
- Eligibility. Different lenders will require you to meet different criteria. Credit score, age, income and residence are all factors that may determine your eligibility for a loan, and there’s no point applying if you don’t meet those terms. Look for “soft search” or “eligibility checker” facilities to find out whether or not you’re likely to be approved, without affecting your credit score.
- Available loan amounts. Consider exactly how much you need to borrow, and why that amount is necessary. Borrowing more than you need will obviously cost you more in the long run, and lenders can be apprehensive about lending larger sums to people with less-than-perfect credit histories.
- Overall cost. If you only compare one factor, it should probably be this one! Aim to keep the overall cost as low as possible, while ensuring the repayment schedule is affordable.
- Interest rate. One of the biggest factors to look at is the APR that’s offered. Your credit score, the amount you want to borrow, your ability to repay and the loan term can all impact this figure. Don’t forget that the advertised “representative APR” may not be awarded to all applicants. Lenders typically tailor rates to the individual.
- Available loan terms. Typically your loan term will be dictated by how much you’re borrowing and how much you can afford to repay each month. Broadly speaking, the longer you borrow for, the more expensive the loan, but realistically it can be necessary to spread larger loans over longer terms.
- Turnaround time. Some lenders are able to get you the funds on the same day that you apply, but these lenders may not have the best rates. Consider carefully whether you really need to prioritise speed over savings.
I want better rates and terms on a loan. How can I improve my credit?
Some of the main factors determining your credit score are your payment history, your credit utilisation, how long you have held credit, the type of credit used and your number of credit searches. To repair your credit, keep in mind the following factors:
- Start small. If you’re going to have to pay a higher rate of interest than those with better credit scores, it might make sense to start with a smaller sum over a shorter term, so that you can prove to a lender that you’re trustworthy. Then, next time, you should be able to score a better rate.
- Save regularly. By demonstrating that you can put aside even a tiny part of your regular income, you will demonstrate that you’re financially responsible.
- Reduce your debt balances. Lenders will also consider your credit utilisation ratio – that’s how much of your available credit that you’re actually using (your debt compared to your total credit). Simply moving your balances around will not actually change your utilisation rate. It’s often easier said than done, but reducing your level of debt overall will naturally make you more appealing to a would-be lender.
- Don’t necessarily close an unused credit account if you don’t have to. Closing an account can actually have a negative effect on your credit utilisation rate. Provided that there are no ongoing costs to do so, and provided you resist the urge to use it, it could be worth keeping an unused credit account open.
- Avoid applying for lots of loans or credit cards. Nothing looks more desperate to a potential lender than a multitude of loan applications in a short space of time, especially if none of the applications result in an account being opened. Use “soft search” facilities to check whether or not you will be approved for credit without affecting your credit score.
As an aside, if you’re not on the electoral roll, it’s worth registering with your local council, as CRAs will check this too.
Build your credit history while you save with LOQBOX
- Choose what you want to save – from £20 to £200 a month.
- Build your credit history with the credit reference agencies.
- Leave with an improved credit history, plus all your savings.
Bottom line
Your credit score can affect your ability to get a loan, with interest rates, terms and eligibility all at least partially dependent on your credit score. It’s important to know not only what your score is, but also how your actions influence it.
When you’re looking to take out a loan, make sure it’s both what you need and something that you can financially handle. If you can’t make timely payments, you could damage your creditworthiness and hurt future attempts at financing. Shop around, do your research, ask advice from an expert or even a trusted friend, and make sure you sleep on any big decisions.
Frequently asked questions
How different factors can affect your credit score
*Disclaimer: The offers compared on this page are chosen from a range of products finder has access to track details from and is not representative of all the products available in the market. Unless indicated otherwise, products are displayed in no particular order or ranking. The use of terms "Best", "Top", "Cheap" including variations, are not product ratings and are subject to our terms of use. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.