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Published 12 September 2023
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Loans for Fair Credit: What You Need to Know

If you have a fair or average credit score, you can still access a range of loans and credit options. However, you may find you face higher interest rates than someone with an excellent credit history.

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When you apply for any kind of credit, lenders will check your credit score to determine what kind of risk you present.

If you have a fair credit score, several lenders may still consider your application for a loan or other form of credit.

Your credit score is just one factor that lenders look at, alongside income and employment status, for example, so having a fair credit score shouldn’t stop you from having a range of loans to choose from if you need to borrow some money.

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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.

Experian’s ranges from 0 to 999, Equifax from 0 to 1,000, and TransUnions’s from 0 to 710, and your score will be rated as anywhere from very poor to excellent.

For each agency, a fair credit score is anything between:

  • 721 and 880 for Experian
  • 439 and 530 for Equifax
  • 566 and 603 for TransUnion

» MORE: How to check your credit score

Can I get a loan with fair credit?

The better your score, the more likely companies are to want to lend to you, and the less they might charge you in interest.

But, it can be possible to get a loan with a fair credit score, depending on the lender and your overall financial situation. Importantly, you need to shop around to get the best loan deal available to you. 

While it shouldn’t be too difficult to find lenders that will offer you a loan, you are likely to find that they will charge you a higher rate of interest than someone with an excellent credit score.

You may also find your credit score affects the amount that a provider will agree to lend you, so you may not be able to borrow as much as someone with a better credit score.

As a result, it’s important to research and compare different lenders to find the size of loan you need, with a competitive interest rate.

Ultimately, it depends on individual lenders whether you can get a loan. Some may only be willing to lend to people with a good or excellent credit history, while others will 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 look at your income to determine if you could afford the repayments.

» MORE: What credit score do I need for a loan?

What loans could I get with fair credit?

There are several options if you want to take out a loan with a fair credit score, including:

Unsecured personal loan

You can borrow money with an unsecured personal loan. These are not secured against property or other high-value assets and you can use them for a range of purposes such as buying a car, renovating your home, paying for a large purchase, and more. 

However, someone with a fair credit score is likely to be charged higher interest rates than someone with a good or excellent credit score.

» MORE: What is an unsecured loan?

Secured loan

Secured loans require 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 house 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.

» MORE: What is a secured loan?

Guarantor loan

With a guarantor loan, a guarantor acts as extra security for the lender. If you add a guarantor to your loan, they agree to repay the loan if you’re not able to, which may make a lender more willing to approve your application.

A guarantor will usually be a friend or family member, but they must have a separate bank account from the borrower.

Car finance

If you need to borrow money to buy a car, you may want to consider car finance. There are several types of car finance available, which can be secured against the value of the vehicle.

Because the car acts as security, it may be easier to get accepted for car finance and receive a lower rate of interest than an unsecured loan if you have a fair credit score.

Pros and cons of fair credit loans

Some of the advantages 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 before applying.

But there are some disadvantages to taking out a loan with fair credit:

  • 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 loan, there is still the question of whether you should get one. It will depend on your individual circumstances and how urgently you need a loan.

Some points to consider are:

  • 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. You’ll need to think about how much you want to borrow, how much you can afford to repay, how close to your credit limit you are, and how much interest you would need to pay to help you decide which option to choose.
  • Have you compared lenders? It’s worth looking at a range of lenders and using comparison tools 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 get a loan with fair credit

If you have a fair credit score, you can get a loan from banks, online lenders, building societies, and credit unions, for example. 

You may not qualify for a loan from every lender, but most providers 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.

When you then apply 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.

Of course, lenders won’t just base their decision on your credit score. They will also look at your employment situation, income and expenses to determine whether a loan is an affordable option for you.

When you apply for a loan, you will typically need to give lenders information including:

  • 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

When you compare loans, bear in mind that you may not receive the advertised representative APR. APR stands for annual percentage rate and shows the annual cost of borrowing. Only 51% of borrowers have to receive the representative APR or lower, so with a fair credit score you may be one of the 49% that receives a higher rate.

» MORE: Tips for successfully applying for a loan

How can I improve my credit score?

Even though it is possible to get a loan with fair credit, if you don’t need the loan immediately it may be worth waiting before you apply.

If you take some time to improve your credit score, you may improve your chances of getting a loan at more competitive interest rates, which could save you money in the long term.

Some simple steps you can take to improve your score are to:

  • make sure you’re registered on the electoral roll
  • pay your bills and any other payments on time
  • check your credit score and correct any mistakes
  • keep your credit utilisation below 30%
  • sign up for schemes, such as Experian Boost and CreditLadder, which use information about your regular spending on rent, bills and more to form your credit score.

» MORE: 15 ways you can improve your credit score

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