If you have fair or poor credit, you are not alone. In fact, 18 million Brits are consistently doing damage to theirs with careless spending and a naive approach to their cards. Having a score this low can get in the way of getting a mortgage, loan or even phone contract.

Going through the loan application process in the UK can seem daunting at times; a roller coaster ride of rejection and recrimination, especially when going through the traditional lending channels. The challenge is only heightened when you have a less than stellar credit score. While there are many alternative lending options for those with poor to no credit, the admission process isn’t as simple as some may think. We’re here to help, with these; our 7 IDEAL strategies to get a loan despite bad credit.

KNOW THE TYPES OF CREDIT SCORE

There are actually two, namely, generic scores and customised scores. Lenders and businesses use generic scores to assess how much of a risk it is to lend money to you. The three big CRAs can send you your generic score if you ask. Individual lenders use their own customised credit scores for customers, based on the information they hold on those customers. Specialised lenders, like car credit companies, prefer to use customised credit reports.

CHECK YOUR CREDIT SCORE

It is a fact that bank loans are risky, and the number of defaulters has been rising steadily in recent years in tandem with an increase in the average household debt. For this reason, many lenders rely on ever more stringent guidelines concerning credit scores. The first thing to do is go through your credit reports and check for any outstanding bills or irregularities. Sometimes, simply rectifying a false charge on your credit report, or paying off an outstanding payment with haste, can instantly give it a boost and open you up to more lending options.

All of this starts with asking for a copy of your credit report. All three major credit bureaus, Experian, Callcredit and Equifax, will allow you a copy of your credit report for just £2. Identify any misinformation or anomalies on your credit report and have it rectified. Lenders are rarely ready to risk their money with people who have  previously failed to pay, but it is possible to try to convince them that you have improved and can be trusted.

UTILISATION NEED-TO-KNOW

Your credit utilisation measures the amount of credit you are leveraging divided by the amount of credit you have available. Credit agencies will examine this as a key contributing factor to your overall score. So, if you have a £500 credit limit and your balance is £480, your utilization is 96%. A good rule of thumb is to maintain your utilisation below 30%, so if you’re trying to improve your score quickly, get your utilisation below 30% as a priority.

REPAY MORE THAN MONTHLY

This might seem counter-intuitive if you are already working to pay down your balance but understand that credit bureaus check your credit once per month, and you never know exactly when they are going to check. By paying more than once per month, it is more likely that the bureaus will see that balance starting to drop, and that can only spell good things for your score.

PERSONAL & SHORT INSTALLMENT LOANS

Personal loans are installment loans where you pay a higher fixed interest rate, and the loan is repaid over a specified period. If you can successfully manage your payments on time each month, your credit score will start to rebuild at the same time that you have access to some much-needed cash.

Another option is a short-term installment loan; often easier to secure than personal loans and offered for a shorter repayment period. In fact, your repayment period can range anywhere from 90 days to three years. However, as your credit score isn’t at its most healthy, you should expect to pay a higher interest rate and to accept a smaller loan amount. If money is needed quickly for a financial emergency, a short installment loan is often a good choice. 

HOME EQUITY LINE

If you own your home, you could take advantage of property values that are currently on the rise, by tapping into a home equity line of credit. This type of revolving credit line allows you to access funds when you need them and then repay over a set period. And as an added bonus, as you pay down your loan, you can ‘re-borrow’ more back to the loan limit. It’s like having a bank account at the ready, other than that this is an account that will always require repayment. 

CONSIDER A CO-SIGNATORY

You may wish to consider entering into a loan with a parent or relative who has strong credit. The drawback to this as that you risk their good credit if you get yourself in a position where you are incapable to pay back your loan on time. However, if you do manage your monthly payments successfully, your credit score will start to climb for the duration of the loan.