What's considered a fair credit rating?
Your credit rating and scores are based on your financial history and how you've previously managed money that you've owed - for example, paying off loans and settling your credit cards or specific bills on time.
The major credit rating agencies in the UK are Experian, Equifax and TransUnion. They all have slightly different scoring systems, but generally, we all fall into one of four categories.
Regardless of your actual 'credit score' you'll be rated:
- Bad
- Fair
- Good
- Excellent
A fair credit score is between 721-880 out of 999 for Experian, 439-530 out of 1000 for Equifax and 566-603 out of 710 for Transunion.
You can check your credit score for free using the following apps; Experian, Clearscore and Credit Karma. Each app uses a different credit reference agency, so to get a comprehensive overview of your credit rating, it’s a good idea to use all three apps.
Can you get a loan with fair credit?
Having a fair credit score means you can apply for loans for OK credit, but it’s unlikely you’ll be approved for loans with the cheapest interest rates, and you may have a smaller choice of providers willing to lend money to you.
Most banks and lenders prefer to lend money to borrowers with a good or excellent credit rating because they’ve settled their debts on time and in full in the past, and are therefore viewed as less risky to lend to.
If you want to increase your chances of getting a loan, the first step is to check your credit score and work on improving your credit rating.
What loans can I get with fair credit?
It’s important to understand that getting a personal loan can be more difficult if you have a poor credit score. Very low-interest fair credit loans are few and far between, so you need to budget to pay a higher rate of interest than the cheapest loans you may have seen advertised.
Loans for fair credit scores typically have a higher annual percentage rate (APR), meaning you'll pay more in interest, which will make borrowing more expensive for you.
If you have a fair credit rating, you may see loans advertised with an APR of 20%, but you might find the interest rate actually offered to you is higher, due to your credit rating. In comparison, borrowers with an excellent credit rating would expect to be offered loans with interest rates at around 10% and below.
How do I find the right fair credit loan for me?
The best way to find the right fair credit loan is to check your credit report and find out why your score is low. Several apps like Clearscore or Credit Karma let you do this for free.
Check the information in your credit report is accurate and if there are errors, let the credit reference agency know ASAP. Check that things like your recent addresses are recorded correctly and whether or not you’ve been financially linked to an individual you no longer have anything to do with.
Next it’s important to shop around. Use a comparison website like ours to help you research lenders and loan products available.
Many comparison sites offer an eligibility checker which allows you to:
- Check your loan eligibility without leaving a hard credit check recorded on your credit report for other lenders to see
- Tailor comparison results so you can only see the loans you qualify for before applying
Finally, only borrow what you can afford. It’s important to work out how much spare money you have left over each month after you’ve paid all your usual bills, to be confident you can afford the loan repayments.
Remember to check the total cost of the loan and any fees for things like early repayment or late payments.
The right fair credit loan for you supports your financial goals and doesn't leave you in worse debt or with a bad credit score.
What are the pros and cons of fair credit loans?
A fair credit loan can help you pay for major purchases like a car, home improvements or unforeseen expenses like vet bills. A loan can be one of the cheapest borrowing options, providing you only borrow what you can afford to pay back.
However, it’s important to consider the advantages and disadvantages of a fair credit loan and explore other sources of borrowing before making a decision.
- It's easy to find and apply for a loan online
- Funds are available quickly if you're approved
- Could be cheaper than a credit card or overdraft
- Repayments are fixed for a set period, helping you budget for the future
- Fair credit loans typically charge high APRs
- You have to stick to repayment terms or risk paying expensive fees
- Applying to lots of lenders in a short period of time will damage your credit score
Are there any alternatives to fair credit loans?
If you struggle to get a fair credit loan with a low APR, there are other alternatives.
Guarantor Loans
Guarantor loans are like a standard personal loan, except somone else guarantees loan repayments will be made if you can't afford to pay them yourself.
Credit Union Loans
Credit unions are not-for-profit community organisations. Their loan terms are usually more flexible, so you may be able to borrow at a better rate even if you have a fair credit score. To qualify for a credit union loan, you'll have to be a credit union member or have savings with them.
BNPL
Buy Now Pay Later (BNPL) is a point of purchase credit option. BNPL is available from most online retailers, holiday companies and auto centres, and can be a good way of spreading the cost of online or shop purchases over several repayments, but it’s typically less flexible than a fair credit personal loan. Be wary of relying on this type of credit too heavily as debts can quickly spiral.
Secured Loans
If you need to borrow over £10,000, a secured loan is an option you may want to research. This type of loan is secured against your home or property which means the equity in your house gets used as collateral, so if you default on the loan, the lender could sell your house to cover what you owe.
Debt Consolidation Loans
Finally, if you’re looking for a better way to manage your existing debts, debt consolidation loans for fair credit may be worth exploring.
This type of loan can help to combine multiple debts into one. So, instead of repaying lots of lenders at different times, you make one monthly payment to one lender, often making your loan repayments more manageable and affordable.
How can I improve my credit score?
Sign up to an online credit reference agency like Experian, Equifax or Transunion or download an app like Clearscore or Credit Karma to access information from your credit report for free. Paid tools such as CheckMyfile provide access to your file from all credit reference agencies, so can give you a comprehensive view.
Check your credit report to make sure it’s accurate, and get in touch with the credit reference agencies if there’s something on your report that’s incorrect.
Here's how to boost your credit rating and get the best fair credit loans:
- Even if you have no intention to vote, get yourself on the electoral role at your current address
- Stick to the terms of any credit agreements
- Always make your credit repayments on time
- Always pay your utility and telecom bills on time
- If you have a credit card keep your usage within 25% of your credit limit
- Avoid applying for multiple credit products within a six month period
- Avoid withdrawing cash on a credit card
- Moving house frequently can damage your credit score, so try to stay in one place for at least 12 months before applying for new credit products
Fair credit loan FAQs
APR is an abbreviation of Annual Percentage Rate, used to demonstrate the overall cost of your loan. All lenders have to provide the loan APR and provide a representative example before you sign a credit agreement.
The APR takes into account all costs during the term of the loan, including the interest rate, charges and any extra fees. The higher the APR, the more the loan will cost you overall.
When you're comparing loans, always check the APR and remember - the lower the better.
A fair credit loan will improve your credit score over the term of the loan if you repay on time and stick to the agreement terms.
However, when you apply for a fair credit loan, a hard credit search will be performed by the lender and recorded on your credit report for other lenders to see, so avoid multiple applications for credit with different lenders within a six month period of time.
If you have a fair credit score and you're concerned about damaging it further by being turned down for a loan, use an online comparison site like ours, to check your eligibility before applying for a fair credit loan.
If you can prove you're a reliable borrower and make regular, on-time payments a fair credit loan will help you to improve your credit score, making borrowing less expensive for you in the future.
The best loans for fair credit are usually found online.
You could apply for a loan from a high street bank, but your chances of approval are lower and a hard credit check will leave a record on your credit report for other lenders to see. Too many applications for credit within six months can put some loan providers off.
An excellent place to start your search for a loan is by using a comparison website like ours, which allows you to compare the APR of a range of loans.