What Credit Score is Needed for a Loan?
Updated on Thursday 17 August 2023
The credit score that is required for a loan depends on many different factors and you can still sometimes obtain loans even with a relatively low credit rating, but typically speaking, you can expect to be more successful at obtaining a better loan with better interest rates if your credit score falls between 881 and 960 which is considered to be ‘good’ according to Experian UK and a ‘fair’ score between 721 and 880.
Of course, this is not always set in stone, so even if your credit score doesn’t fall in this range, that doesn’t mean to say that you won’t be accepted for a loan.
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What credit score is needed for personal loans?
A personal loan is essentially an ‘unsecured’ loan; they’re not secured against any other asset such as your home and they can be used for almost any purpose that you deem necessary.
The amount of money that can be loaned to you as part of a personal loan depends on numerous factors, including the bank or lender itself, but you can usually expect loaned amounts between £1,000 and £10,000.
Personal loans can be used for numerous things, depending on what you need it for, such as covering the hefty cost of medical bills and expenses, for debt consolidation and in the event that you need to pay for a one-off large-sum event such as a wedding.
If you’re wondering what credit score you need for personal loan approval, it entirely depends on which agency you decide to check the score with.
For example, Experian will provide you with a score out of 999, whereas TransUnion rates you out of 710 and Equifax will give you a score out of 700.
Learn more: What is a Good Credit Score in the UK?
What credit score do I need for a loan in the UK?
When thinking about what is a good credit score to get a loan with in the UK, this is again dependent on which financial credit score agency you decide to obtain your score from.
You can carry out a credit check with numerous different agencies, but two of the most popular companies to use to check your credit score in the UK is Experian or Checkmyfile (if you want a full report from all four UK credit agencies).
Mortgage loan
For a home loan, you’d want a score from Experian to be between 961 and 999 if you’re hoping to secure some of the best mortgage loans with low-interest rates. If your score is between 881 and 960, you could expect to get most, but not all ‘good’ mortgage loans.
Business loan
If you wanted to take out a 20k loan for your business in the UK, for example, Experian would rate you between 0 and 100, with 0 representing high risk and 100 representing low risk. Naturally, the higher your credit score, the lower risk you are and the more likely you are to be accepted for a business loan.
Car loan
A good credit score in order for you to be eligible for a car loan should sit you anywhere between 881 and 999.
What credit score do I need for a £5000 loan?
£5,000 is generally considered to be a relatively small loan, but it can always snowball into more debt if you’re unable to pay it back, so it’s imperative that you’re aware of the complications if you cannot pay it back and ensure that you’ve carried out thorough research before committing to any sized loan.
There’s no exact figure for what credit score you might need for a £5,000 loan, as many lenders will differ in what they consider to be ‘good’. Some may offer you a £5,000 loan even if you have a bad credit score, whereas some may require your credit score to sit somewhere in the 800s.
Read more: How to Improve Your Credit Score
Can you get a loan with a 600 credit score?
It is definitely possible to get a loan with a 600 credit score, but it all depends on which bank or lender you choose and whether they will accept it or not.
It’s a good idea to try and improve your score as much as possible before applying for a loan, but if you’re really determined to get one with a 600 credit score, you should definitely find a couple of providers willing to accept it.
Why can't I get a loan with a good credit score?
While you may automatically assume that a good and even high credit score would guarantee you a successful application when applying for a loan, unfortunately, this isn't always the case.
There could be a number of reasons why you are unable to obtain a loan, even with a good credit score.
As there is no one true credit score, due to numerous different credit agencies having their own way of measuring your credit, it can be hard to determine exactly what is considered to be a good score.
As well as your actual credit score, some of the other factors that lenders and banks will consider when you apply for a loan include your financial associations (have you had any financial relationships with someone else who has bad credit, for example?), your employment status and your total amount of existing debt.
Any or all of these factors could result in your loan application being unsuccessful, even if you believe that your credit score is good.
Loans for bad credit
If you have a poor credit score, it can be very difficult to be approved for a ‘normal’ loan. Therefore, you may wish to go down the route of applying for a bad credit loan.
You will still obtain a loan, but due to your bad credit rating, you’ll likely suffer from higher interest rates and fewer lending opportunities.
Check your credit score now to get a better understanding of your eligibility, or read our related guides for further advice and information.
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