Compare personal loans for “fair” credit scores
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.
Warning: late repayments can cause you serious money problems. See our debt help guides.
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.
Depending on your score, you’re said to have excellent, good, fair, poor or very poor credit:
|TransUnion (formerly Callcredit)||0-550|
|1: Very poor|
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).
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”.
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 24hrs 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.
What is APR?APR stands for Annual Percentage Rate. It’a figure that sums up how much a loan will cost if taken out for a year, considering both the interest rate and any mandatory charges to be paid (for example an arrangement fee) over the duration of a loan.
All lenders must calculate the APR of their products in the same way, and must tell you the APR before you sign an agreement, so for consumers it can be a handy tool for comparison.
However, lenders are only obliged to award the rate they advertise to 51% of those who take out the loan – the other 49% could pay more. That’s why it’s often referred to as the representative APR.
With a fair credit score, you may still be eligible for many of the personal loans available on the market; however, since your score is less than ideal, you’ll likely end up with a higher rate than the representative APR.
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:
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
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.
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