Loans for Low Credit Scores

Cara Bradley

Written by

Cara Bradley

5 min read

Updated: 27/02/2024

Whether it’s an urgent vet’s bill or a conked-out car, many of us will be hit with a financial emergency at some point in our lives.
If you have a low credit score and are looking to borrow money, you may be curious to know more about applying for a loan.
Our guide to loans for low credit scores should tell you everything you need to know about applying, improving your score, increasing your chances of acceptance, and other options to explore.

What causes a low credit score?

A low credit score could be caused by a number of factors.

  • Financial difficulties, such as defaulting on payments and repayments, failing to stick to credit agreements, and going over your credit limit.
  • Making too many credit applications over a short space of time. When you apply for credit directly with a lender, they will carry out a hard search on your financial history. Too many hard searches in a short space of time could have a negative effect on your credit score.
  • Declaring bankruptcy.
  • Being issued a County Court Judgement (CCJ).
  • Being a victim of identity theft, during which your financial details were stolen and used to make transactions.

While having a low credit score can feel disheartening, it’s important to remember that a low credit score doesn’t need to be permanent. There are things you can do to begin improving your score and work towards a healthier credit position. We’ll talk about this in more detail later.

Low credit vs no credit

If you’ve never paid bills or borrowed money before, it’s unlikely that you will have any credit history to show, resulting in a low credit score. This is known as having a ‘thin’ credit file.

Try not to worry – we’ve all got to start somewhere, and there are many ways that you can establish and build up your credit score.

Can I apply for a loan with a low credit score?

Yes, you can apply for a loan with a low credit score.
Some lenders – including those on the Viva Money panel – are happy to consider applications from those with less-than-perfect credit scores.

What are my chances of being approved for a loan with a low credit score?

It may be possible to get a loan with a low credit score, although it’s worth noting that your options might be limited, and you could be presented with higher interest rates. There’s also a chance that you may not be able to borrow as much money as you’d like.

Can I search for a loan with Viva Money even if I have a low credit score?

Viva Money welcome people with all credit scores to search for a loan.
We’re a credit broker, and we work with a large panel of trusted lenders who offer short-term personal loans from £100 to £10,000, with repayment terms between 3 and 60 months.

Sometimes, when searching for a loan with a low credit score, you may come across companies claiming to offer loans without the need to undergo a credit check. You should be extremely cautious in these circumstances. A responsible lender will always want to make sure that a loan is affordable for you. When researching loans, check that any company you apply to is registered with the Financial Conduct Authority (FCA); you can do that here.

For your peace of mind, Viva Money and all of the lenders we work with are authorised and regulated by the FCA.

Ways to improve a low credit score and build up a thin credit file

You can start your journey towards a healthier credit position today with the following tips:

  • Get on the electoral roll. Register to vote will make it easier for potential lenders to verify you and your personal information, such as your current address.
  • Check the details on your credit report for errors, and update any inaccurate information.
  • Pay your bills on time.
  • If you have a credit card, stay well within your credit limit.
  • Avoid using your credit card to withdraw money from ATMs. Some lenders may view this as bad money management.
  • A thin credit file could be helped by sensible use of a credit builder credit card. You can choose to use a credit builder credit card to make small, affordable purchases, and repay the balance in full every month. This type of credit card usually has a manageable credit limit to help you stay on track. Your activity will be reported to the credit reference agencies and, in time, you could see an increase in your credit score. Be sure to do thorough research before deciding whether a credit builder credit card is the right product for you.

Could a loan make my low credit score worse?

If you’re approved for a loan with low credit and you do not keep on top of your repayments, it’s likely that your credit score will suffer further as a result.

On the other hand, if you make your repayments on time each month and clear the balance of the loan within your chosen term, you could see an improvement in your score, especially if you have also worked on other credit building methods, such as those mentioned in the section above.

I’m struggling to repay my loan, what can I do?

If you’re having difficulty repaying your loan, we would urge you to contact your lender as soon as possible.
It can be tempting to bury your head in the sand, but reaching out and asking for help is the first step towards taking back control.

Your lender is not there to judge you or your situation. They will appreciate the fact that you have been upfront about your difficulties, and will want to work with you to come up with a solution to reduce the pressure moving forwards.

I’m worried about money. Where can I go for help?

For many of us, talking about money doesn’t come easily.
Please know that free help is readily available on sites such as Citizens Advice, MoneyHelper, and National Debtline.
These sites helpfully cover a range of money topics, including benefits, debt management, and the cost-of-living crisis.

You may also be interested in taking the Money Health Check quiz, which has been put together through a partnership between Viva Money and charity StepChange. The quiz can be taken online for free, and will not affect your credit score in any way.
The answers you provide will generate advice based on your financial situation and what you can do next.