Got Bad Credit? Your Options for Borrowing and Rebuilding in the UK
Published 22nd of November 2013·Updated 7 April 2026
Reviewed by: Reviewed for accuracy April 2026
Having a poor credit score makes borrowing harder and more expensive, but it does not make it impossible. In the UK, options exist for people with bad credit - including credit-builder cards, credit unions, guarantor loans and specialist lenders - but the most important step is understanding why your score is low and addressing the root cause before taking on more debt.
Short Summary
A bad credit score is typically the result of missed payments, defaults, County Court Judgements (CCJs), high credit utilisation or having very little credit history. All three UK credit reference agencies - Experian, Equifax and TransUnion - hold slightly different data, so it is worth checking your report with all three.
Borrowing with bad credit is almost always more expensive. Higher interest rates reflect the lender's increased risk. Before taking on new debt, consider whether you genuinely need to borrow or whether budgeting, benefit entitlement checks or free debt advice could solve the underlying problem.
Payday loans are a last resort. The FCA caps total costs on high-cost short-term credit, but rates can still be equivalent to 1,500 per cent APR or more, and missed payments can trap you in a cycle of debt.
Free advice from StepChange or Citizens Advice can help you identify the best path forward without any sales pressure.
What are my borrowing options with bad credit?
The options available to you depend on how poor your credit score is, what you need the money for and how quickly you can realistically repay it.
| Option | Best for | Key risk |
|---|---|---|
| Credit-builder credit card | Rebuilding credit gradually | High interest if you carry a balance |
| Credit union loan | Affordable borrowing at lower rates | Membership required; credit checks still apply |
| Guarantor loan | Borrowing with a trusted person's backing | Risk to the guarantor if you cannot pay |
| Secured loan | Larger amounts, home ownership required | Repossession risk |
| High-cost short-term credit (payday) | Genuine emergencies only | Extremely expensive; debt spiral risk |
What is a credit-builder credit card?
Credit-builder cards are designed specifically for people with poor or limited credit histories. Lenders including Vanquis, Aqua and Capital One offer cards with credit limits typically between £150 and £1,500. The interest rates are high - often 29 to 40 per cent APR - so the strategy only works if you pay the full balance every month and never carry a balance.
Used correctly, a credit-builder card demonstrates responsible borrowing to the credit reference agencies and can meaningfully improve your score within six to twelve months.
What is a credit union and can it help?
Credit unions are not-for-profit financial cooperatives owned by their members. They often lend to people that mainstream banks will not, and the FCA caps the interest rate on credit union loans at 3 per cent per month (42.6 per cent APR). That is significantly lower than many specialist lenders charge.
To join a credit union, you typically need a common bond with existing members - such as living in a particular area or working in a specific industry. The Credit Union Finder tool at findyourcreditunion.co.uk can help you locate one you are eligible to join.
What is a guarantor loan?
A guarantor loan involves a third party - usually a family member or close friend with a good credit history - agreeing to make repayments if you cannot. This reduces the lender's risk and allows you to access credit you might otherwise be refused.
The key risk is to the guarantor. If you miss payments, the lender will pursue them for the money. This can damage relationships and the guarantor's own credit file. Both parties should understand this fully before agreeing. Rates on guarantor loans typically range from 29 to 60 per cent APR, so they are not cheap.
Should I consider a payday loan if I have bad credit?
Payday loans should be a last resort only. The FCA introduced a price cap in 2015 that limits total charges to 100 per cent of the original loan amount - meaning you can never owe more than double what you borrowed. However, within that cap, rates are still very high.
The greater danger is the debt spiral: borrowing to cover a shortfall, then being unable to repay in full, then borrowing again. Citizens Advice and StepChange both report that a significant proportion of people who contact them for help started with a payday loan.
If you are considering a payday loan, first check whether you are entitled to any benefits you are not claiming. The charity Turn2us has a benefits calculator that can help.
How do I start rebuilding my credit score?
Rebuilding your credit score is achievable but takes time. Experian estimates that a score can improve meaningfully within six to twelve months with consistent good behaviour.
The most effective steps are: registering on the electoral roll, paying every bill on time (including utilities and mobile contracts), reducing your credit utilisation below 30 per cent of your available limit, and avoiding multiple credit applications in a short period. If you have old accounts with defaults, those marks drop off your credit file after six years.
FAQ
How long does bad credit last on my credit file?
Most negative marks - including missed payments, defaults and CCJs - remain on your credit file for six years from the date they were recorded. After that, they drop off automatically. Bankruptcy stays on your file for six years from the date of the order.
Can I get a mortgage with bad credit?
Yes, but your options are more limited and rates are higher. Specialist mortgage lenders, sometimes called "adverse credit" lenders, consider applications from people with defaults or CCJs. A whole-of-market mortgage broker can search for deals that do not appear on comparison sites. The larger your deposit, the better the rate you are likely to be offered.
Will checking my credit score damage it?
No. Checking your own credit score through Experian, Equifax or TransUnion creates a "soft search" that is only visible to you and does not affect your score. Hard searches - triggered when you apply for credit - do appear on your file and can have a small negative impact.
Is there a minimum credit score to get any loan in the UK?
There is no universal minimum. Every lender sets its own criteria. Some specialist lenders have no formal score threshold and assess applications holistically. However, the worse your score, the fewer lenders will accept you and the higher the interest rate you will pay.
What should I do if I am refused credit?
Ask the lender why you were refused - they are required to tell you that a credit reference agency was used, and you can obtain a copy of your file. Check your file for errors; incorrect information can be disputed and removed. A free debt adviser from Citizens Advice or StepChange can help if missed payments or debts are the reason for refusal.