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When you apply for any kind of credit, lenders will check your credit score as part of an assessment to determine the likelihood that you’ll repay the loan.
There are plenty of lenders that will consider your application for a loan if you have an average or fair credit score. This is because your credit score is just one factor that lenders look at, alongside your income and employment status, for example. Here we explain more about why an ‘ok credit score’ shouldn’t stop you from getting a loan.
What is a fair credit score?
A fair credit score is a score that’s between bad and good. It’s likely you have a fairly good track record of making repayments but you may have encountered some issues, such as missing a payment or two or using a large amount of your available credit in the past.
It could also mean that your credit history is relatively short and you’ve not had time to build up a good or excellent score.
There are three main credit reference agencies in the UK, Experian, Equifax and TransUnion. Each may have different information, and each generates its own credit score for you.
For each agency, a fair credit score is anything between:
- 721 and 880 for Experian, out of a range from 0 to 999
- 439 and 530 for Equifax, out of a range from 0 to 1,000
- 566 and 603 for TransUnion, out of a range from 0 to 710
» MORE: How to check your credit score
Can I get a loan with fair credit?
You should find it possible to get a loan with a fair credit score, as long as your overall financial situation allows. However, you may face higher rates of interest, and find you can borrow less, than if your credit score was good.
Ultimately, it’s up to a lender to decide whether they want to offer you a loan. Some may only lend to borrowers with a good credit score, while others may be willing to accept applications from those with fair or poor credit scores.
Lenders may look at the reasons for your credit score and use this extra context to make a decision. They will also consider other factors, such as your income, outgoings, existing debt and employment status, to try and work out of it’s likely you could afford the loan repayments.
» MORE: What credit score do I need for a loan?
What loans could I get with fair credit?
There are two main types of loan you can get with a fair credit score.
Unsecured personal loan
The main option is an unsecured loan, or a personal loan, as they are commonly called. These can be taken out without having to provide any security for the loan and used for a range of purposes, including buying a car or renovating your home.
» COMPARE: Best personal loans
Secured loan
On the other hand, a secured loan requires you to put up an asset as security, often your house, which the lender can repossess if you don’t repay the loan.
Putting your home on the line is a considerable risk that shouldn’t be taken lightly, but it typically allows you to borrow larger sums and pay lower interest rates because the lender has that added security. For the same reason, secured loans are also sometimes easier to get if you have less-than-perfect credit.
» COMPARE: Best secured loans
Pros and cons of fair credit loans
Advantages
Some of the benefits of taking out a fair credit loan include:
- If approved, you could get the money relatively quickly.
- A range of lenders may still be willing to consider your application.
- Many lenders will allow you to check your eligibility for a loan, without affecting your credit score, before applying.
Disadvantages
But there are some potential drawbacks you need to consider too:
- You may not be eligible for loans from certain lenders.
- You may be charged a higher rate of interest than someone with a better credit score.
- If you fall behind on repayments, your credit score could be affected and you risk getting into unaffordable debt.
Should I get a loan if I have fair credit?
Even if you’re eligible for a fair credit loan, it’s important to think carefully whether you should get one. Much will depend on your individual circumstances and how urgently you need a loan.
Some points to consider might include:
- Do you need the money immediately? If you need to cover an emergency cost, then a loan may be the right option for you. But, if you don’t need the money right now, it may be better to delay your application and work on improving your credit score to help you access more competitive rates.
- Are there any alternatives? A loan may not be the best option, so it’s worth considering if a credit card or other form of credit is more suitable. Think about how much you want to borrow and how much you can afford to repay. How close you are to your credit limit, and how much interest you would need to pay could help you decide which option to choose too.
- Have you compared lenders? You should always look at a range of lenders to see what loans are available. Many providers will also allow you to check your eligibility for a loan to see your chances of approval, without affecting your credit score.
- Can you afford the repayments? You shouldn’t get a loan if you don’t think you can afford to repay it. If you get behind on your repayments, you could end up in unaffordable debt and your credit score is likely to be affected.
How to apply for a loan with fair credit
Banks, online lenders, building societies, and credit unions are all likely to offer loans that you can apply for with a fair or average credit score.
You may not qualify for a loan from every lender, but most will allow you to check your eligibility with a ‘soft’ credit search to determine whether you can borrow from them. These soft searches will not appear on your credit file.
If you then make a full application for a loan, lenders will conduct a hard credit check, which will appear on your credit history and could affect your score. Multiple applications in a short space of time could affect your credit score and suggest to potential lenders that you may be struggling financially.
What will lenders want to see?
When applying for a loan, you’ll usually need to share:
- your name
- your address (and address history if you’ve moved house in the past few years)
- contact details
- how much you earn
- your employment status e.g. full-time work, part-time work, self-employed
- rent or mortgage payments you make
- any other outstanding debt obligations
» MORE: How to get a loan
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