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Can You Get A Personal Loan with A Low Credit Score?

can you get a personal loan with a low credit score
Do you have bad credit?

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
what is 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

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.

personal loan with a low credit score

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.

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Financial Fitness

How Do I Fix My Credit Score?

fix my credit score

A bad credit report can cost you thousands of dollars in interests, penalties and fees and many people have asked us “how do I fix my credit score?”. It may also block you from getting a promotion or possibly from getting a promotion or the best deals for a dream car. Here are tips to answer your question.

Request for free copies of your credit file 

…from the major credit reporting bureaus in the country. It is important to check your file if you want to start repairing your credit score.

Examine your files to know exactly the areas that you need to work on. For example, if you have a terrible credit history, it will be helpful if you can check which accounts you have missed paying, and when you started doing so. If you have done poorly because you always maxed out your credit cards, it may be time to refer to those accounts so you will know which card to stop using for the moment. At the same time, it would also help you check whether you have defaults on old accounts so you can settle them as soon as you can.

Dispute credit errors

It is your right as a consumer to get correct credit report. The law allows you to dispute errors by sending a dispute letter to the credit bureau that listed inaccurate entries.

Remember that errors are costly. They can seriously hurt your credit score and bring it down by over a hundred points. What’s worst, you may not qualify for low interest loans simply because of data entry errors or failure on the part of the creditor to update your credit information. It is also a good opportunity for you to correct wrong information that indicates identity theft or credit card fraud.

Minimise your credit card balances

Don’t go beyond 30 percent of your credit limit. Pay all your balances for the month, and when you use a card, make sure that you keep those card balances low to boost your score. If you are having a hard time in paying multiple credit card balances, you can get a personal loan to consolidate them—not only to boost your score but to save money on interests. It is also easier to remember repayment schedule because you only have one lender to think of, so your chances of missing payment is very low.

Lower your utilisation rate

It is not enough that you pay balances in full each month. If you have a higher utilization ratio than 30%, they will still add weight to your monthly balances. One of the best ways to deal with it is to make sure that you make multiple payments throughout the month, to lower your balance. But, not all credit card providers allow this. So, it is important to stick to your credit limit at all times.

Will paying nuisance credit card balances fix my credit score?

Do you have small balances on a number of credit cards and you haven’t paid them yet?

If you want to boost your score, eliminate all the balances on your cards. Instead of charging $50 on credit card A and another  $50 on credit card B, why don’t you just charge them all in one card with a low interest rate, and pay it all off each month?

Don’t get old accounts off your credit report

True, you want to get rid of negative items because they are bad for your report. But, your score will improve when the oldest paid account remains there. The old debt on your credit report like a mortgage or car loan is not bad, so don’t be in a hurry to get it removed from your file the minute you get your debt paid off.

Most of the negative items are really bad for your credit score. But, they just disappear from your credit file after seven years so don’t argue to get your old paid accounts eliminated from your file. Even if it showed that you missed a lot of payments—just keep them there. At least, you were able to show that you managed to repay after all.

Then of course, there are good debts. A good debt is the account that you’ve handled well and paid on time. When it appears on your file—your score will be better simply because you have a long history of good debt. Lenders will also look at your application favorably knowing that you have been a responsible borrower for a long time.

How do I fix my credit score when I have good and bad debts?

In a nutshell, leave your old debts alone, pay all your balances. Don’t close accounts, especially those where you had solid repayment record—because it will eventually boost your score and increase your chances of getting favorable loans. For a shortcut to fix credit history, contact Clean Credit.

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Financial Fitness

When your credit file is filled with unpaid defaults

unpaid defaults can be fixed

This article discusses ways to repair your credit rating by removing unpaid defaults. Are you experiencing financial hardship? Is this leading to unpaid defaults? You are not alone.

Identify the reasons why you have unpaid defaults

Understand that life happens and sometimes, you must deal with financial setbacks. Loss of employment, illness and relationship breakdowns may make repayments difficult.

In other instances, it could be as simple as poor bookkeeping practices, not keeping your receipts, moving to another address or data entry issues on the part of your credit provider. But whatever the reasons are, don’t let them deter you from pushing for a stellar credit rating.

Remember that creditors report that you’re on default when you are 60 days late with your monthly payment. It will serve as a warning to potential creditors that you have defaulted on your obligations and could do it again with another lender. Understand that paying off the unpaid defaults does not necessarily mean that you can erase those entries from your credit file. They will stay there for years. But, if you don’t pay them off, it could be worse.

Clean up your credit file

The best way to do this is to simply update your payments. You may think about debt consolidation if you have multiple credit card debts and other consumer debts. You can get a new loan to pay off all your debts. By doing this, you can reduce your monthly payments, possibly reduce the overall cost of the loan and simplify your payment. It could help you build up your credit again by reducing your debts and making it easier for you to pay on time.

By fixing your impaired credit file, it would not only become easy to obtain finance but cleaning up your credit file can also give you a wider range of lending options. Remember that lenders approve clients based on their borrowing capacity.

This refers not only to their ability to repay their debts but also to their credit score. You may also qualify for low-cost loans which may not be possible if you have a poor credit score unless you opt for specialized lenders who provide affordable loan products for bad credit borrowers.  Of course, the interest you pay on a loan would dramatically decrease as well.

Request a copy of your credit file

You can request a free copy of your credit file from the major credit bureaus in the country. Check them for errors, and if you see inconsistencies or inaccuracies. Sometimes unpaid defaults on your file are a consequence of an error made out of your control. You can file a dispute at the credit agency involved.

Or, you may also file a complaint with your credit providers and ask them to update the report.  Sometimes, there are unjust listings or mistakes due to human error. So, make it a habit to ask for a copy of your credit file each year so you can easily contact the creditor concerned and talk over the issues with them.

While it is possible to directly file a dispute with the reporting agency, they will not remove the negative entry without the approval of the creditor or at least valid proof that the entry is erroneous or inaccurate. There are also credit repair specialists that remove defaults on your credit file.

Consolidate your loans

You can apply for a second mortgage to consolidate all your high-interest loans into a single, easy-to-pay loan. You could save money on unpaid interest and late fees by rolling all your debts into one. It is also a lot easier to remember because you only have one due date to recall each month.

If you’re still unsure whether you can make timely payments because of your busy schedule—you can automate payments to ensure that you can pay on time.

This will not only clear up your old debts and help you start with a clean slate—but debt consolidation can also help you rebuild your credit score fast your potential lenders would also see the improvement on your borrowing habits and you are most likely to qualify for low-interest and bigger loans in the near future.

Develop good financial habits to prevent unpaid defaults

After you understand the importance of paying off your debts, it may be time to look for the best financial products when you need them. Look for specialised lenders that offer accessible and affordable loans when you are finding some difficulty in managing personal finances because of cash flow shortage due to emergency situations. Afterwards, make it a habit to check on your budget and make some adjustments in order to save more and spend less son a day to day basis.

You can stretch out your dollars and avoid debts by sticking to your budget. Budgeting is important not only for low-income earners but for high-income earners as well.

It is important to make the most of your incoming savings so you have some money to tap into when emergency situations like car repairs, urgent home renovation hospitalisation arise. By doing so, you can avoid being chased down by debt collectors for your unpaid defaults and you don’t have to rely so much on another loan to bail you out.