Struggling to get loan approval? This is probably because you have a bad credit history.

How do I get a bad credit history?

You can get a bad credit history in any of the following ways:

  • making a late payment on your debt
  • missing a debt repayment
  • defaulting on a payment
  • or anytime you fail to fulfil a financial contract or commitment

How do lenders decide whom to lend to?

When you apply for a loan or credit, lenders want to know that you will be able to repay the money they lend you. There are two ways they usually assess this:

  • They work out your credit score by asking a series of questions
  • They check your credit history with a credit reference agency

Your credit score is based on several factors, including your income, your monthly spending, any major things you own, and any other loans you might have. You receive points for each of your answers. If you do not score enough points, lenders may refuse to give you a loan, offer to lend you a smaller amount, or charge you a higher interest rate.

If a lender refuses a loan, can I apply to different lenders?

Yes you can, but do this with caution. It is important to remember that each application will be noted on your credit file, and too many refused applications will have an even worse effect on your credit record.

How will I be able to get a loan?

Many lenders do cater to individuals who have bad credit records. If a lender does offer you a loan, you will probably have to pay a higher interest rate than usual, or be offered a smaller loan amount.

Tell me more about these types of loans

Secured loans involve using something of value as security for the loan, usually your house. This is quite a risky loan: if you cannot make payments, your house is at risk.

Unsecured loans are among the most difficult loans to get. They represent a very high level of risk for the lender as there is no security in case you do not make payments. This makes lenders that much more cautious.

What about Loan Sharks?

Loan sharks are unlicensed moneylenders who should be avoided at all costs. They charge high interest rates and sometimes use threats and violence to frighten people who cannot pay them back. Loan sharks offer loans on bad terms or with extremely high interest rates.

Remember, loan sharking are illegal operations. Check to make sure that your moneylender is licensed before borrowing money from them.