What credit score is needed for a loan?
There are many circumstances in life where you will need to take out a loan - personal loans, car loans and mortgage loans being some of the most common - but your choice of loan and the amount you can borrow can be significantly affected by your credit score.
Read on to find out more about how your credit score affects your ability to get a loan.
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What is considered a good credit score for personal loan approval will depend on an individual credit reference agency’s credit scoring system.
There are three main credit reference agencies (CRAs) in the UK, namely Equifax, Experian and TransUnion. See the table below for each credit reference agency’s unique credit score range and what’s considered a ‘good credit score’ to help get a loan.
UK Credit Reference Agencies’ Credit Scores
Credit reference agency
Credit score range
Good score to get a loan
|Equifax||0 - 700||420+|
|Experian||0 - 999||881+|
|TransUnion||0 - 710||604+|
There is a fourth, less well-known credit reference agency called Crediva with a unique scoring system - unlike the other 3 main agencies, it only reports on public information.
Different lenders will use different credit reference agencies to get information regarding your financial history, so having a good score with all the best credit agencies would be ideal.
If you’d like a free credit score check with all 4 main credit agencies simultaneously (to avoid the hassle of painstakingly conducting an individual credit check with each individual agency), visit checkmyfile.com.
What credit score you need for a loan in the UK isn’t set in stone, as your ability to get a loan can also depend on the type of loan you are seeking (i.e. a business loan, car loan, home loan or mortgage loan), the amount you need to borrow, your credit history and the individual lender, amongst other things.
Read more: Types of loans explained
A good credit score will help you get a personal loan, although a good credit score is not always necessary.
Having a poor credit score could affect your ability to get a personal loan or limit your options, i.e. the amount, term and APR will usually be negatively impacted by a poor credit history. However, a poor credit score will not stop you from obtaining a loan per se - for example, many payday lenders offer short-term, high-interest loans for bad credit, but you'll need to make sure it's worth it as you'll have to repay a lot more than you intend to borrow.
Unlike a mortgage loan, a personal loan is not secured against a property and a lender will want to ensure that they will get their money back should you default on your repayments. If you have a poor credit history, before agreeing to lend you money a lender may require a guarantor (who has a good credit rating) to guarantee they will pay back the loan in the event you can’t or don’t.
A good credit score does not guarantee you will be offered a personal loan or one that you'll be able to afford the monthly repayments on. To find out why you can’t get a loan with a good credit score, see below.
You might like: 7 things to know before applying for a personal loan
There is no set credit score needed for a loan of £5,000 - many lenders will loan this amount even if you have a poor credit rating, but the term will usually be short and the APR (interest rate) high.
That said, a good credit score will increase your chances of being offered a more competitive, affordable loan from a reputable lender and may negate the need for a guarantor.
Incidentally, since April 2018, you are now able to get personal loans worth up to £25,000, but getting a £20,000 loan that isn’t secured against your property could prove difficult and costly.
Yes, you can usually get a loan with a credit score of 600 although this will only be deemed a ‘good credit score’ if a lender checks your credit history with TransUnion and no other credit reference agencies.
See our table above for the main three credit reference agencies’ credit score ranges and ‘good’ scores.
Your ability to get a loan will be affected by more than just your credit score. Read on to find out what else can affect you getting a loan.
Even if you have a good credit score, this isn’t the only criteria lenders consider before deciding whether to lend you money.
In addition to a good or excellent credit score, a loan offer can be influenced by:
- Whether the loan is secured or unsecured
- If the loan is with or without a guarantor
- The amount
- The term
- How much you may have already borrowed previously
- How many times you’ve applied to borrow on previous occasions
- How well you’ve managed existing or previous loans
- Your income and outgoings
It’s always best to check your score and history with all the main credit agencies so you can assess your credit history and scores before applying for a loan. This gives you the opportunity to try and improve your credit score prior to applying as the more times you apply for a loan, the worse this will be for your credit rating.
Check your score now by tapping the green button below, or check out our useful guides for further information and advice regarding credit scores and lending.
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