Having poor credit is never good. While it doesn’t immediately disqualify you from applying for personal loans, you may find it harder than if you had good credit. You may also have to pay a far higher interest rate and fees for a personal loan with a low credit score.
Several lenders will consider your application for a personal loan without letting your low credit score rule their judgment.
The best way to ensure you’re approved is to research and avoid lenders who will run a hard credit check on you. This will make your credit score worse.
One thing to remember is that you should nurture your credit score. Poor credit can impact many things. Let’s take a look into whether you can get a personal loan with a low credit score.
What is a low credit score?
The credit reporting agencies within Australia compile your entire credit history into a report. The report is what your lenders look at when deciding whether or not to approve you for a personal loan with a low credit score. The report includes a credit score, which is a number based on things such as:
- Your credit history
- Your age
- Where you live
The higher your score, the better your chance of being approved for finance and receiving favourable fees, rates and terms. While each individual agency has its different scoring system, it generally goes like this:
- Over 750- An excellent credit score
- Between 700-749– A good credit score
- Between 580 and 669– A fair credit score
- Below 580– A low credit score
How do I know if I have a low credit score?
Your credit score can be checked online for free here. You can also go deeper by checking what listings are dragging your credit file down.
Banks and traditional lenders are usually wary of people with low credit scores. That is because they are more likely to fall behind on repayments.
7 Most Common Causes of Poor Credit
Negative events in your credit history can be very bad for your credit score. The most common causes are:
- Credit Enquiries: Applying for multiple loans over a small window of time will indicate that you could be trying to borrow above your means.
- Missing or defaulting on loan payments: Regularly missing repayments for longer than 14 days or breaking the terms of your agreement by leaving a repayment unpaid for longer than 60 days.
- Breaking your credit agreements: Late payments, missed payments, or not paying the minimum required monthly can impact your credit rating.
- Declaring bankruptcy: This frees you of your financial obligations on outstanding loans and lines of credit. However, it significantly impacts your credit history, often prohibiting you from borrowing for a number of years. Going bankrupt can also make getting a personal loan with poor credit difficult.
- Making minimum credit card repayments: Paying your credit card debt off slowly doesn’t only have a negative impact on your credit score. It also means you’ll be in debt for longer and pay more in interest & fees.
- Incorrect filing: It’s not uncommon for a creditor to wrongly stamp a black mark against your name. For example, criteria must be correctly followed in order to list a default.
- Identity theft: Always closely monitor your accounts and immediately flag suspicious activity with your bank or lender.
- Choosing the wrong financial product: Choosing excessive limits with high interest can make it difficult to pay off the loan. Always research before taking out a line of credit or loan and ensure you can service it properly.
- Having no credit history: Your score may be low even if you have never borrowed or defaulted on repayments. This is simply because there is no history to rate your borrowing behaviour off.
You can still get a personal loan with a low credit score, but it will be much more challenging.
How do I improve my credit score?
Improving your credit score certainly isn’t easy. However, there are many ways you can fix it. Positive credit events will help you. Some positive credit events are:
- Keeping your debts small and manageable
- Keeping up with your repayments
- Fully repaying your loans
- Making more than the minimum repayments on your credit cards.
Obviously, this isn’t a quick fix, but it is a fix. Fixing your credit is important, as you can’t always get a personal loan with a low credit score.
Credit repair is a fantastic option if you are looking for a quicker fix. Credit repair experts can negotiate to get rid of defaults, credit enquiries, court judgments and black marks from your file, but it does cost money.
Can I get a personal loan with a low credit score?
Getting a personal loan with a low credit score is more difficult than if you have good or excellent credit. However, it is still possible.
Some lenders specialise in providing personal loans for people with weak credit histories, but these may have higher interest rates and fees. In addition, you may need to secure your loan against a personal asset, such as a car or your mortgage, to increase your chances.
The good news is that applications with the Australian Lending Centre have no impact on your credit score and do not require security. Therefore, you can apply for finance risk-free.
How personal loans work
The great thing about personal loans is that you decide what you do with the money. It goes directly into your chosen bank account.
Getting a personal loan with low credit works in the same way. The only difference is a more lenient approval process where your credit score isn’t checked. Rather than your credit score being the deciding factor, your income amount, employment stability, and current debts are the focus.
A personal loan for debt consolidation does work a little differently. Rather than receiving money into your account, the loan directly pays off any outstanding debts included in the agreement. Moving forward, you just repay the new lender each month.
Things to keep in mind when getting a personal loan with a low credit score
There are some important things to know when you get a personal loan with a low credit score. Here are some things you need to consider:
- Each lender will have its own policy. However, you will find it hard to get approved for a loan of more than $50,000 if you have a poor credit score.
- You are likely to face higher interest rates than usual. Make sure you do your research to find the best rate available.
- While lenders can be sympathetic, they have a process to follow.
- As mentioned above, you will most likely have to secure your loan against a personal asset to increase your chances of approval and keep costs down.
- In some cases, you may need to provide more documentation than you would for a normal loan to prove that you can afford your repayments since you will be deemed a ‘high-risk borrower’.
The bottom line of getting a personal loan with a low credit score
Getting approved for a personal loan with a low credit score can be hard. However, the Australian Lending Centre makes it as easy as possible. We provide a wide range of services low credit score loans Australia-wide to ensure that everyone has access to finance when they need it.
