Loans for Fair Credit: What to Know Before You Apply

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.

Laura Whateley, Rhiannon Philps Last updated on 18 May 2022.
Loans for Fair Credit: What to Know Before You Apply

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

A fair credit score shows you have a decent record of making repayments but indicates that you may have encountered some issues, such as missing a payment or two, or that your credit history is relatively short. Whatever has caused your credit score to be less than perfect, many lenders will still consider your application for a loan or other credit option.

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.

» MORE: What is a credit score?

What is a fair credit score?

There are three main credit reference agencies in the UK, Experian, Equifax and TransUnion. Each may have different information, and each generates their 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?

Whatever your credit score, you will normally need to be a UK resident and at least 18 years old (or 21 years old for some lenders) to qualify for a loan, as well as meeting any other criteria set by the lender. Assuming you meet their basic requirements, lenders will then look at your credit file and overall finances to work out how likely you are to be a reliable borrower and whether to offer you a loan.

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

This means that if your credit score is ‘fair’, you may need to work a bit harder to make sure you get the best loan deal available. 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 even more important to research and compare different lenders to try 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, as well as looking at your income to determine if you could afford the repayments.

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

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. The answer depends on your individual circumstances and how urgently you need a loan.

If you need to borrow money to cover an immediate cost, then you may consider taking out a loan. However, it’s a good idea to consider alternative options before applying.

For example, if you already have a credit card or overdraft, then you may choose to use these rather than taking on extra credit. Whether these are suitable options will depend on how much you want to borrow, how close to your credit limit you are, and how much interest you would need to pay.

If, after weighing up your options, you decide that a loan is the best option, you can compare loans and see what deals you are eligible for. Before agreeing to a loan, make sure you can definitely afford the repayments and only borrow the amount you need.

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.

Also, if you don’t need a loan immediately, it may be better to delay your application. You could use this time to try to improve your credit score, which could help you qualify for more loan deals and access lower rates of interest.

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

What are my loan options?

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

Unsecured personal loan

You can potentially borrow up to £25,000 with an unsecured 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 fair credit is likely to pay higher interest rates than someone with a better credit score.

» COMPARE: Unsecured loan rates

Secured loan

Secured loans can be an option if you need to borrow a larger sum of money. With these loans, you put up an asset as security, often your house, which the lender can repossess if you don’t repay the loan.

While this comes with extra risk to the borrower, secured loans typically have lower interest rates than unsecured loans because the lender has added security.

» COMPARE: Secured loan deals

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 to the borrower.

» COMPARE: Guarantor loans

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 to schemes, such as Experian Boost and CreditLadder, that 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

Image source: Getty Images

About the authors:

Laura is a journalist and author, writing about money since 2008. Including writing for The Times for 9 years. She believes finance doesn't need to be complicated. Author of Money: a user's guide. Read more

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

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