Credit scores & loans: What credit score do you need for a loan in the UK?

We’ve all been there. Life throws a curveball. The car needs fixing or the kids need stuff for school. Either way, you need more money than you’ve got right now. So, you might have to borrow.

But what credit score do you need for a loan? What if you’ve struggled with your finances in the past? Do you need a “good” credit score for a personal loan? Loqbox is here to help you understand personal loans and how your credit score affects them.

You can borrow more credit with a personal loan than from a credit card, often with lower rates of interest.
So it can be a great affordable option. But to be accepted for a loan, the lender will require a credit check where they check your credit history, which may then show on your credit score. 

You can read more about how your credit score works in our blog. While your credit score is very important for indicating your eligibility when getting a loan, it’s not the only factor. Let’s break it down: 


What’s a good credit score for a personal loan?

First of all, there isn’t one set credit score which is recognised as “good” or “bad” across the UK’s three main credit reference agencies (CRAs), Experian, Equifax and TransUnion. Each uses a different scoring criteria, so your credit score will vary from agency to agency.

Lenders will take your credit report into account when you make a loan application, including your past credit history. But there is no credit score that automatically approves you for a loan.

Of course, the better your score, the better your chances to be offered great rates on your loan. But it’s not as simple as hitting a perfect credit score number (because what is?).

Lenders have their own criteria for loan approval.
As well as your credit file, they check factors like your income and expenses to see if you can afford the loan and what risk level you are. Some lenders will only lend to “low risk” borrowers, while others specialise in lending to people with “poor” credit scores. Being right for one lender doesn’t always mean you’re right for all of them! 


Check your credit score

You can find out what your credit score is without harming it for free by checking out one of these services:


ClearScore (uses Equifax data)*

Credit Club (uses Experian data)

Intuit Credit Karma (uses TransUnion data)

*Just so you know, we get a little commission if you sign up to ClearScore using this link.

What credit score do I need for a loan?

Generally, the higher the score, the lower the risk to the lender. “Excellent” and “good” scores are low risk and can usually get credit and favourable rates. “Fair” scores are considered sub-prime. They won’t get the best deals but can still be approved for loans. “Poor” ratings are thought of as high risk and are unlikely to get credit, or will at least be charged very high interest rates.


Loans for “excellent” and “good” credit scores

With “excellent” or “good” credit scores you’re in the best position for affordable borrowing with the best range of options. You are more likely to qualify for the most competitive rates.

However, you do still need to have the right income and expenditure for the specific lender. A great credit score alone isn’t going to be enough.

If you want to borrow a small amount of money over a short term, you might find a great credit score could get you the best options on an interest free credit card. If you manage to make all of your payments in time on a 0% offer, you could make full repayment without paying any interest at all.

But you need to be careful. If you fall behind, or don’t pay off the debt before the interest free deadline, you could find that it gets very expensive, very quickly.


Loans for “fair” credit scores

With a “fair” rating you should still be able to borrow money from lenders. But you may not be accepted for all of the credit cards and loans they offer. It is also possible that you will be given higher interest rates for repayments.

Lenders will usually advertise loans with a representative annual percentage rate (APR). This rate tells you the cost of borrowing over the course of a year. Lenders only have to offer their APR to 51% of successful applications. Typically, borrowers with higher scores will be given the listed APR. With a “fair” rating it is more likely that you will have to pay a higher rate.

You should check your eligibility before applying for loans to avoid being declined. Eligibility checks should only require a soft check which won’t affect your credit score. When lenders process loan applications they complete a hard credit check which is recorded on your credit file. Having too many hard checks on your file within a six-month period has a negative impact on your chances. Check your eligibility and only apply for loans you expect to be accepted for.


Loans for “poor” credit scores

A “poor” rating tells potential lenders that you may have previously struggled to make repayments and that you could be “high risk”. Therefore, they might not be willing to give you a loan. And if they do, it’s likely to come with high rates of interest. Or the total amount you can borrow will be limited. They basically want to be sure they’ve covered the perceived risk.

It is also possible to take out a guarantor loan, where a friend or family member can agree to take responsibility for the repayments if you are unable to keep them up. However, it is worth mentioning that if you do fall behind and fail to make your repayments, you could damage the credit file of the guarantor as well as your own.

What’s the best credit score for a consolidation loan?

Debt consolidation is a way of moving multiple debts into a single account. This doesn’t pay off the total amount that you owe. But it may make it easier to manage. It can also reduce the interest rates you are paying. You can close off debts from multiple sources and focus on one repayment plan. But consolidation loans won’t be for everybody.

A lender will do a hard credit search on you if you apply for a consolidation loan. You may struggle to be accepted if your credit score is low. Or it may impact the type of loan and the interest rate you are offered. The credit search will also temporarily reduce your credit score so you need to be careful how many times you make an application. 


What impact does a consolidation loan have on my credit score?

Consolidating your debts into one account can have both positive and negative impacts on your credit score. Let’s take a look at the good and the bad.

By moving your debts into one place, you may find it easier to make payments in full and on time. This will be seen as responsible use of your finances which in turn will help to improve your credit score. You may also be able to reduce your interest rate and therefore make larger repayments. By reducing more of your total debt you will start to see your credit score rise. 

When you apply for a consolidation loan, as with any loan, the hard credit search lenders carry out will temporarily reduce your credit score. You may also find that you use more of your available credit when you move multiple debts into one account. This can have a negative affect on your credit score. However, if you are patient and keep making your repayments, you could find that your score grows more over time.

It all depends on your situation and your ability to stick to your plan. Setting realistic goals is a great way to improve your credit score. It may take time but it will be worth it in the end. 

Whether you are applying for a personal loan or a consolidation loan, you will normally get a better deal with a higher credit score. Loqbox has some great advice on getting the most out of your credit score.


Tips to keep your credit score healthy

You might have a “poor” credit score or limited credit history. You may have only recently moved to, or returned to, the UK and not had time to build it up.

There are still options to get a loan. You may need to be patient. These things can take time. But with a little effort you can soon find you’re being offered more affordable rates to borrow the money you need. You can read more about how to improve your credit score here. But here are some simple things to keep in mind when applying for a personal loan:

Check your eligibility

Before you apply for a loan to make sure you are likely to be approved. This will avoid unnecessary hard credit checks and declines on your record.

Space out your loan applications

Too many won’t look good on your credit file so leave at least six months between applications.

Keep up repayments

And make sure they are on time. Set up direct debits or standing orders through your bank to make sure you don’t accidentally miss any repayments. 


Don’t borrow unless you’re sure you can manage the repayments

Debt can be a nasty trap if you’re not careful so you need to have a plan.


Build up your credit score and get the best rates

This might take a little longer but it is worth it in the end and can save you £1,000s.

Build your credit score with Loqbox

A great way to build up your credit score is to get started with Loqbox. It’s proven to build your credit score with the three main CRAs (Experian, Equifax and TransUnion). They want to see that you can make regular payments, and Loqbox makes it easy and stress-free!


Loqbox Grow is a 0% credit account that builds your score as you use it! 

Loqbox Save boosts your credit score as you grow your savings!

Loqbox Rent turns your regular rent payments into credit history building gold!

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Subscribe to Loqbox Inbox
Sign up for our monthly emails and we’ll do our best to help you find your way on your journey with money
Give your credit score a boost
For just £2.50 a week, you could see your credit score rise by up to 300 points in the first three months
Get started
Improvements to your credit score are not guaranteed