How to Get a Loan With Bad Credit | A Handy Guide from Pocket Cash!

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$2,500

$300 $10,000

18 Months

13 Months 24 Months

Estimated repayments

$52.19

$104.71

$228.77

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The Interest Rate for Secured Medium Loans is 48%. Maximum Comparison Rate is 67.41% p.a.

WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan.

How To Get a Loan With Bad Credit

How To Get a Loan With Bad Credit

Looking for a loan?

Are you looking for a loan but worried you’re less than perfect credit score is holding you back. It may be true that traditional lenders like banks and credit unions consider a bad credit score a huge red flag. But it’s 2020! These lenders aren’t your only option. Fortunately, there are several online lenders on the market that can look past a bad credit score. So, if you’re wondering how to get a loan with bad credit, we’ve got all the details you need to read! 

What is bad credit?

Bad credit refers to a bad credit score. Your credit score is a numerical representation of the information in your credit report. Your credit score gives a strong indication to lenders and credit providers of your credit creditworthiness and reliability in paying your bills. It also allows them to preview future performance. 

Often, having bad credit can damage your chances of accessing competitive interest rates. Either that or it could hurt your chances of getting approved for a loan at all. Therefore, it’s recommended that you stay on top of your bills and credit repayments. 

Do I have bad credit? 

Do you know your credit score? If you don’t, don’t stress! You can access a free annual credit report from each of the following credit agencies:

The following table shows Equifax’s rating scales from an ‘excellent’ to a ‘below average’ credit score. 

Credit ScoreRating
833 and aboveExcellent
726 to 832Very Good
622 to 725Good
510 to 621Average
510 and belowBelow Average

How can I get a loan with bad credit?

Good question (and we’re glad you asked)! Despite what you might think, you can get approved for a loan with bad credit. How? Well, these days, there are many online lenders that can look past your credit score. Instead of rejecting you solely on the basis of a credit check, lenders can now look for other reasons to approve you. If you’ve been staying on top of your finances recently, this could show your potential lender that you’re responsible with money. 

Pocket Cash can do the hard work of finding a lender for you! Instead of submitting multiple loan applications hoping to get approved, apply with Pocket Cash’s lender finding service! We submit your application to multiple lenders to give you the best chance of approval – bad credit and all! 

What affects my credit score?

There are several factors that contribute to calculating your credit score. We’ve listed some of these below:

Payment History 

Payment history is the most important factor that affects your credit score. Lenders look at your credit history to see how you have managed your previous debt. They want to see how reliable you have been with your repayments. If you have missed some of your repayments or failed to pay back your loan on agreed terms, your credit history will be negatively impacted. This is not just for loans however, you should be consistent with paying all your bills- credit cards, utilities, telco etc. 

Credit history length

Credit history length includes the age of your oldest credit account. The history length accounts for approximately 15% of your credit score in total. The longer your credit history length is, the better your credit score will be. 

Credit utilization

If you divide the total revolving credit you are currently using by the total of all your revolving credit limits, you will have your credit utilization ratio. Your credit utilization ratio plays a big role in calculating your credit score. Examples of revolving credit are credit cards and personal lines of credit. Your ability to repay these on time indicates how reliable you are with on-cash funds. You should not use more than 30% of your available credit. 

Credit mix

Ever heard the saying ‘don’t put all your eggs in one basket?’ of course you have. Well that phrase can be used to describe credit mix. The more diverse portfolio of credit accounts you have, the better your credit score will be. This could for example be, a car loan, credit card, mortgage or student loan. the more the merrier! 

New credit

When you apply for new credit or a loan, a hard inquiry is created on your credit report. Several hard inquiries will cause your credit score to drop. Additionally, the number of your current credit accounts will indicate to lenders that you may be a higher risk, because you are managing too many outstanding balances at once. 

Why is it hard to get a loan with bad credit?

If you have bad credit or no credit it can be tough to get a loan application approved, especially with traditional lenders and big banks. Bad credit indicates the likelihood that you will default on a loan obligation. Because of this, lenders will see you as a riskier borrower than people with higher credit scores. That is why many lenders will reject you for a loan with bad credit, because they assume there is a higher chance that you’ll not make the repayments on the agreed terms. However, it is possible to get bad credit loans, but first you should consider improving your credit score for a higher chance at approval. 

Easy tips for improving your credit score

Although some lenders can offer bad credit loans, it definitely won’t hurt to improve your credit score. Not only will this improve your chances of approval but it also means you could be offered more competitive interest rates. Check out this handy Pocket cash guide to improving your credit score. Unfortunately, there is no ‘quick fix’ when it comes to improving your credit score. However if you implement these tips below and change your financial behaviours, your score will begin to rise over time. 

  1. Know your credit score: You can access a free annual credit report from the following agencies: Illion, Experian and Equifax. Make sure there are no inaccuracies on your credit report. If there is, you need to rectify these immediately. Knowing your credit score will give you an idea of your general financial standing. Additionally, it can help you determine what to look for in a loan offer.
  2. Pay off your debt: Your level of debt, expressed as your credit utilization ratio, is an important factor contributing to calculating your credit score. A low credit utilization ratio will tell lenders you haven’t maxed out any credit cards and you likely manage credit well. 
  3. Don’t apply for too much credit: When you apply for new credit, whether it be a loan or a credit card, it will create a hard inquiry on your credit report. Too many hard inquiries will cause your credit score to drop and these inquiries remain on your credit report for up to 2 years. 
  4. Pay your bills on time and focus on paying off your debt: When you apply for a loan, lenders want to see your reliability at repaying your bills as this is generally a good indicator of future performance. Your credit utilization ratio is a number that reflects your level of debt and also plays a large role in calculating your credit score. The more outstanding debt you have, the higher ratio you will have. People with the highest credit scores will typically have the lowest credit utilization ratios. You should either start by paying off your smallest account or the account with the highest interest rate.

Get help from a lender-finder to find bad credit loans

If you are looking to apply for a loan, but you’re worried bad credit will hold you back, it can be hard to know where to start. A quick Google search for ‘how to get a loan with bad credit’ will show you pages and pages of Google results. The market is flooded with lenders – far too many to choose from. 

That’s where Pocket Cash can help! Our lender finding service does the hard work for you! Simply submit an application and we will show your application to a number of lenders to give you the best chance of approval. Not only is this super convenient, but it means you won’t have to submit multiple applications before getting approved – benefiting your credit score! 

If you’ve got questions, head to our FAQ page. Alternatively, you can get in touch with the Pocket Cash team for more information.

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