Extremely bad credit usually means your credit file shows serious or recent problems, not just a low score. Some lenders on our panel may still consider an application, but they look closely at what you can afford now and at how recently things went wrong.
This guide covers what lenders look for, when borrowing is restricted or likely to make things worse, and the free help available. If your credit is poor rather than severe, our guide to loans for bad credit may be more relevant.
What counts as extremely bad credit
There is no official definition, and each credit reference agency uses its own scoring scale. Lenders look at the detail on your file rather than a single number. These entries tend to put an application at the very bad end:
- Several missed payments or defaults in the last year or two
- One or more county court judgments (CCJs), or decrees in Scotland, especially if they are unpaid
- An active debt management plan or other repayment arrangement
- An individual voluntary arrangement (IVA), a trust deed in Scotland, or a debt relief order
- Bankruptcy, or sequestration in Scotland
Most of these entries stay on your credit file for six years. Their effect usually fades as they get older, especially if you have kept up to date with everything since.
What lenders look at
Every lender must check that a loan is affordable for you before it lends. With a very poor credit history, lenders tend to weigh up:
- How recent the problems are, and whether anything is still unpaid or in arrears
- Whether you have kept up with your current commitments since
- Your income against your rent, bills and existing repayments
- Whether you are in a formal debt arrangement that restricts new borrowing
- The amount and term you ask for
A default from several years ago that has since been settled is usually viewed very differently from one last month. Expect fewer options, smaller amounts and higher rates, and expect some applications to be declined.
Borrowing during a debt arrangement or insolvency
If you are in a formal arrangement, check its rules before you apply for any credit:
- Debt management plan: new borrowing can break the terms agreed with your creditors, so speak to your plan provider first
- IVA or trust deed: most arrangements limit new credit without permission, so ask your insolvency practitioner or trustee
- Bankruptcy or a debt relief order: the law limits how much you can borrow without telling the lender. GOV.UK explains the bankruptcy restrictions, and sequestration in Scotland has its own rules, which your trustee can explain
While an arrangement is still running, borrowing more is rarely the answer. Talking to the people who manage it is usually the better first step. If the real problem is that money runs out every month, our guide on how to budget when you're living payday to payday may help more than a loan.
Alternatives to look at first
- Credit unions: they may consider members with a poor credit history, and the interest they can charge is capped by law. Find Your Credit Union lists those near you
- Budgeting Loans: if you have been on certain benefits for six months, a Budgeting Loan can help with essential costs, and you only pay back what you borrow
- Universal Credit: you may be able to get an advance for unexpected costs, which is paid back from future payments
- Local welfare help: many councils run hardship schemes, and in Scotland the Scottish Welfare Fund offers crisis and community care grants
- Free debt advice: MoneyHelper, StepChange and National Debtline can help you deal with existing debts before you take on more
Rebuilding a very low score
Your credit file can recover, but it takes time and steady habits:
- Check your report with all three credit reference agencies, Experian, Equifax and TransUnion, and ask them to correct anything that is wrong
- Add a notice of correction if there is a short explanation lenders should see, such as illness or a job loss
- Bring accounts in arrears up to date or agree a plan, and ask for settled defaults to be marked as satisfied
- Register on the electoral roll at your current address
- Space out credit applications, and use soft search eligibility checks where you can
How to apply
Borrowing responsibly
It is worth making sure the monthly repayment fits comfortably around your other commitments before you apply. Focus on the total amount repayable across the full term, not just the headline monthly figure, and only borrow what you really need.
Every lender on our panel is authorised by the Financial Conduct Authority, and high cost short term credit is subject to an FCA total cost cap, meaning you cannot repay more in interest and fees than the amount borrowed. If money is tight, free and impartial help is available from MoneyHelper.
Representative Example: Borrow £1,000 over 18 months. 18 monthly repayments of £89.22. Total amount repayable: £1,605.96. Interest: £605.96. Annual interest rate: 59.97% (fixed). Subject to application approval by the lender. Not all lenders offer loans up to £5,000. Representative APR 79.5% (Variable). Any representative monthly repayment shown is for illustration only, based on our representative APR. Your actual repayments will be confirmed by the matching lender if your application is approved.