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A guide to bad credit loans

What is a bad credit loan?

The term “bad credit” is somewhat blurred so we’ll make it clear for you. Having bad credit doesn’t always mean that your credit history is really bad or poor; it might just be that it’s less than perfect. If you’ve ever been rejected for credit by a bank or lender due to “bad credit”, it could be due to having a slightly flawed credit history rather than very bad.

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Representative APR 49.9%

Representative example: Amount of credit: for months. Interest rate: 41.2% pa (fixed). scheduled monthly payments of . Total amount payable: . Representative 49.9% APR.
Representative example: Amount of credit: for months. Interest rate: 41.2% pa (fixed). scheduled monthly payments of . Total amount payable: . Representative 49.9% APR.


Having a less than perfect credit history means that at some point in the near or distant past, you may have failed to make your credit repayments on time, or you won’t have paid them at all. This means you could find it difficult to get approval for new credit from lenders such as banks.

You’re unlikely to be judged a high credit risk if you’ve only missed the odd payment or two and have subsequently made those payments. However, if you have lots of missed payments, you’ve been referred to a debt collection agency, you filed for bankruptcy or you constantly maxed out on your credit cards, it will have had a negative effect on your credit score. Therefore, new creditors could see you as a high-risk customer making it difficult to get credit at the lowest APR rates.

At 118 118 Money, we believe that hard-working people who’ve been turned down by their bank should still have access to a flexible and affordable loan deal, which is why we offer an alternative personal loan solution for those with a less than perfect credit history.

What is a credit score?

Your credit score is a number calculated from the information held in your credit report, which indicates the probability of you being able to pay back the loan or credit. The higher the number, the higher the probability that the Creditor will see you as being able to repay the credit, and you may be seen as a lower risk to lend to.

There are three main credit reference agencies, Experian, TransUnion and Equifax, which all use unique score systems and algorithms to calculate your credit score. Therefore a ‘good’ score interpretation and a ‘poor’ score interpretation may vary widely, depending on which credit bureau you use. It’s important to read their unique explanations of what your credit score means.

Improving your credit score

Many people in the UK may have found themselves with a flawed credit history, but it doesn’t mean that we’re all irresponsible borrowers. Your less than perfect credit score may be where it’s currently at due to a few missed payments in the past or you may have accumulated a number of debts. Applying for credit time and again can also lead to a negative mark on your credit profile, so it’s important to be wary of this each time you seek credit so that you don’t end up making it worse.

Luckily, there are lots of things you can do to improve your credit score and some of them are surprisingly easy to do. Here are some to get you on your way:

  1. Check your credit report regularly

You can get access to your credit report from these three credit-referencing agencies:

This document compiled and held by credit reference agencies gives a summary of your credit history and financial behaviour. It includes your personal details such as address and date of birth, information on your borrowing and payment histories, the length of your credit history, information on the total credit you have available to you and how much of that you’ve used.

Some of the things that are not included in your credit report are your salary and details of savings accounts you hold. Under the Consumer Credit Act, you have the right to see the file held on you by credit reference agencies for a small fee.

Companies such as Experian are great for doing this as they allow users to take advantage of a free 30 day trial, which means you can access your credit report for free in exchange for a few details.

  1. Avoid making lots of loan applications

If you make lots of loan applications in a short space of time, this could send a signal to lenders that you’re having financial difficulties. If you want to shop around for the best loan deal, ask companies to provide you with a loan quote before you apply. Loan quotes won’t be listed on your credit file whereas loan applications are.

At 118 118 Money, we offer a Quick Check, so you can find out how likely you are to be accepted before you apply, without affecting your credit score.

Applying to two lenders at the same time where we are one of the lenders isn’t necessarily a problem because we look beyond your credit report to understand your current financial situation.

If, on the off chance that there’s a mistake on your credit report, you can contact the credit reference agency and challenge any outstanding issues that may be affecting your ability to borrow.

  1. Register to vote on your local electoral roll

One of the ways that lenders guard against identity fraud is to check the electoral roll to make sure you live where you say you do. If you move house, visit to find out how to contact your local Electoral Registration Office and request a ‘register to vote’ form.

There’s a lot more you can do to help fix your credit score. See here for further tips.

Taking action to improve your credit score not only increases your chances of getting a loan, it could also reduce the amount of interest you have to pay in future. Credit bureaus can also help you to clean up your credit file, although you may have to pay a fee for their help and advice.

Applying for a loan with less-than-perfect credit

118 118 Money loans are specially designed for the many people in the UK who have less than perfect credit and have been rejected by their bank. Every loan application we receive undergoes a rigorous affordability test because we want to ensure that you can manage your fixed repayments comfortably.

When you do take out a loan with us, your credit agreement will show up on your credit history, but if you can demonstrate that you can commit to making all of your monthly repayments on time, it will indicate that you’re financially responsible which in turn will help to improve your credit score in the long run.

If you find yourself, like many, in the less than perfect score bracket and your bank has refused you a loan, don’t despair.

118 118 Money look beyond your credit profile and wherever possible, we try to say ‘Yes’ to customers who we feel are capable of managing their repayments comfortably. With us, you could borrow from £1,000 to £5,000 over a period of 1 or 3 years whether you need to borrow money for a planned home renovation, debt consolidation, an unexpected bill such as a car repair or vet bill or any other reason you may have.

It should also be remembered that repaying borrowing over a longer term may increase overall interest charges, so if you are consolidating and extending the term of your borrowing, consider this.

If you want to know how likely you are to be accepted for a loan before you apply, try our Quick Check. Our Quick Check will not impact your credit rating - and it’s simple and easy to apply for a loan once you’ve had an indication that you’ll be accepted.

Our online application form is quick and easy to complete. If all goes well and we require no further information from you, we’ll be able to give you a fast decision. If accepted, you could receive the money in your bank in under 24 hours.

Representative 49.9% APR.