Terrible Credit Loans

Written by

Cara Bradley

5 min read

Updated: 22/02/2024

If you’re worried about your credit score or curious to know whether you may be able to get a loan with terrible credit, our guide may be able to help you find out more.
In this article, we’ll cover ways to improve your credit position and share information about how a good credit score could help your chances of being approved for a loan if you choose to apply for credit in the future.

What is a credit score?

Credit scores range from Very Poor to Excellent.
Your credit score is based on your financial information and history. Credit reference agencies, such as Experian, TransUnion, and Equifax monitor how much you have borrowed and how you’ve managed your borrowing and use this information to calculate a score. It’s important to remember that each of the three credit reference agencies have different scoring systems but they should show the same information.
If you notice a dramatic difference from one credit reference agency to another, or you spot any mistakes appearing on your credit report, you can query this by contacting the agency directly.

What causes terrible credit?

A number of things could be the reason someone has a terrible credit score; these could include:

• Past financial difficulties.
• Making late repayments or failing to make repayments altogether on any current or historic credit commitments.
• Bankruptcy.
• Having a county court judgement (CCJ).
• Moving home regularly. Generally, lenders like to see three years’ worth of address history when assessing an application for credit.
• You have been a victim of fraud. We understand how frustrating this can be, especially as this is through no fault of your own.

It’s easy to feel disheartened if you have a terrible credit score but there are steps you can take to work towards improving this over time.

Terrible credit vs no credit history

Terrible credit should not be confused with having no credit history at all, although both may result in a low credit score.
People who have never borrowed credit or paid bills before may have what is known as a ‘thin’ credit file. This is especially common in people who are just starting out on their credit journey.

Later, we’ll look into ways that people with terrible credit or no credit history can increase their score.

Can I get a loan with terrible credit?

It’s important to understand that if you decide to apply for a loan with terrible credit, your chance of approval could be low. If you are offered a loan, you may find this is for a higher interest rate. There’s also the possibility that you may not be able to borrow as much money as you’d like.
If you decide to apply for a loan with terrible credit, you should first check that the company you are applying with is authorised and regulated by the Financial Conduct Authority (FCA). You can check a company is on the register by clicking here.

Is there anything I can do to improve my terrible credit score?

We understand that having terrible credit can be worrying. Please try not to let your credit score get you down – there are many ways that you can work towards a healthier credit position.
Let’s take a look at some of the things you can do to work on improving your credit score.

• Registering to vote could have a positive impact on your credit score. This is because being on the electoral roll provides potential lenders with a quick way to verify you and your personal information, including your current address.
• Sharing a joint account – including a mortgage - with somebody who has poor credit history could have a negative effect on your own score.
• Ensure that all bills and any current credit commitments are paid on time each month.
• Have you got a credit card? Be sure to stay well within your limit and, if you can, make more than the minimum required repayment amount.
• Check that the information on your credit report is correct and up to date. Make contact with the credit bureau if you spot something that needs updating. Things like a mistyped address can, surprisingly, cause a decline in your credit score, but can be corrected.

Credit builder credit cards

A credit builder credit card may be an option to consider for people aiming to establish and work on their score.
These credit cards are designed to be used responsibly to make small, manageable purchases which are then paid off each month. Over time, you could notice an increase in your credit score.
It’s worth noting that a credit builder credit card is best used alongside other credit-boosting methods, such as those mentioned above.

Will taking out a terrible credit loan affect my credit score?

Your credit score will be affected by any financial product you take out.

If you manage your borrowing well by making all your repayments on time each month, there’s a chance that you could eventually see an improvement in your credit score.

On the other hand, if you default on your repayments, your credit score is likely to suffer as a result.

I’ve taken out a loan that I’m struggling to repay. What can I do?

While it can be tempting to bury your head in the sand, you should contact your lender as soon as you can.
It’s far better to reach out and be honest about the issues you’re facing, rather than fall behind on or miss your repayments. Your lender will want to work with you to put a plan in place going forwards.

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

We’re sorry that you’re experiencing money worries and we understand how all-consuming this can be.
You can access free, impartial money and debt management advice on sites such as Citizens Advice, National Debtline, and MoneyHelper.

Viva Money have collaborated with debt charity StepChange to provide a Money Health Check quiz, which can be taken online for free. The answers you provide will generate advice for your current financial situation with tips on what to do next.