What credit score do I need to get a personal loan?

Your credit score is number out of 1000 that – combined with your credit report – helps lenders understand how you manage money.

It’s made up of things in your credit report, like the number and type of accounts you have, how much of your available credit you’ve used, your payment history and the length of your credit history.

There are three main credit reference agencies in the UK: Equifax, TransUnion and Experian. Each one uses its own scoring system – which is why your credit score might look different depending on which agency you use.

At ClearScore, we use Equifax to bring you your credit score. We also show you what the average score is in the country and your local area – giving you a better idea of how you’re doing.

Generally, the better your score, the better the personal loan offers you could start seeing. That could look like lower interest rates or higher credit limits.

Lenders have specific criteria they’ll want you to meet but having a good credit score usually means you’ll be more likely to be accepted. That’s because your score gives lenders an indication of how well you manage money and if you’ll be able to afford to repay the money you borrow.

If you have a bad credit score, you could still get a loan.

There’s not a specific number for a ‘good’ credit score. At ClearScore, our score bands look like this:

If your score fits into the last three bands, it usually means you have a good history of paying back the money you borrow – like on a credit card ­– on time and in full.

If your score is between 0 and 519, you could still see offers for loans, credit cards or car finance but the lender might give you a lower limit or higher interest rates. It’s a good idea to look at ways to improve your score.

Lots of things affect the types of offers you see and your chances of being accepted so understanding your credit score and report is key to getting to grips with your credit choices.

A better score could mean better offers. That might look like lower interest rates on a loan or a higher credit limit on a credit card.

Lenders want to know you can pay back the money you borrow, whether that’s on a credit card, loan, car finance or mortgage. If you have a good credit score, and your report shows you have a history of making payments on time and in full, lenders may decide it’s less risky to lend to you.

How likely you are to be approved for something like a loan – also known as eligibility – depends on several things, including:

Payment history

If you have any existing credit (like a credit card, mobile phone contract, loan or car finance, for example) it’s important that you pay back the money you owe on time and in full.

A missed payment – no matter the amount – can negatively affect your credit score by as many as 100 points. The impact will fade over time but a large drop in your credit score can impact the types of offers you’re seeing and your chances of being accepted for a new line of credit.

Credit utilisation

When you take out a credit card, you’ll be given a certain limit. How much you use per month is known as your credit utilisation. Ideally, you’ll want to keep your monthly credit utilisation below 30% because it shows lenders you can responsibly borrow money and repay it.

How you use credit cards – or even your overdraft – does impact your chance of getting a loan. That’s because it forms part of your credit report and history, and shows lenders how you manage other types of credit.

At ClearScore, we show you how much you’ve used as a figure and a percentage – so it’s easy to keep track of.

Length of credit history

Your credit history grows as you manage lines of credit – whether that’s on a loan, phone contract, credit card, car finance or mortgage. Over the years, the repayments you make, the accounts you open and close, and other details are stored in your credit report and make up your credit history.

When you’re looking for a loan, your credit history lets lenders know if you have a good track record of responsibly managing money.

If you’ve not built up a history yet, have a look at these easy ways to start building your score.

Credit mix

This just means the types of credit accounts you have – lenders like to see that you can manage different credit over time.

New credit

Applying for several lines of credit over a short period of time can be a red flag for lenders – it can look like you’re desperate for credit. If you’ve just taken out a credit card, for example, it’s a good idea to wait a little bit before applying for a loan. A good rule of thumb is to wait about six months, but it depends on your own circumstances.

Lenders will also want to some more information from you

You’ll need to give the lender some details about yourself so they can check if you’re eligible. They’ll probably ask for:

• Your bank details (of the account you want the loan to be paid into)
• Your current address and any from the last three years
• Proof of employment and income (so they can see if you’re able to make repayments)

Knowing how to apply for a loan can help speed up your search.

If you have a bad or low credit score, you could still get a loan.

You might have to pay more interest, or you might have to get a secured loan where you offer something as security (like your house, car or savings account).

But, if you do get a loan and you make your payments on time and in full, you can grow your credit score and unlock better offers. Some of our lenders will offer secured loans which could increase your chances of being approved.

Here’s a representative example from one of our lenders:

Representative example

If you borrow £2,000 over 24 months at a fixed rate of 59.9%*:

Monthly repayments - £131.05                                     

 Total amount repayable - £3,145.20

*59.9% representative APR

There are some easy ways to improve your credit score so you’re in the best possible position before applying for a loan. If you’re brand-new to credit, you should register to vote so your name and address is easy to confirm – and it’ll give your score a boost.

Have a look at these 10 easy steps to help get your credit score on track.

There are different types of loans out there that could work for you. Understanding your options before you apply can ensure you’re making the right choice for you.