Can I get a Personal Loan with Bad Credit?

It’s a question we commonly hear. No definitive answer can be provided as each and every loan application is appraised on its own merit. A case by case approach. What we can provide is some solutions and recommendations to improve the likelihood of your loan application being approved, even if you have been told, or believe that you have bad credit.

For starters, what is credit? Good, bad, or otherwise this is referring to your credit history and effectively a measure of your ability to manage credit, and repayments. Representing the credit-worthiness of an individual. In simple terms, lenders use a credit score (a numerical expression of your credit appeal) to determine who qualifies for a loan. Credit score is used as a risk identifier. If a person has a blemish-free credit history and a respectable credit score then they showcase qualities that will improve their probability of having a loan application approved. In return, this person would also benefit from likely having a lower interest rate. Compare this to someone who may have a poor credit history – reflected in a lower credit score which will result in the person having a high interest rate or even having their loan application declined.


To find out what a credit score is and how to determine your personal credit rating follow the link here. Alternatively, this Comprehensive Credit Reporting article details the nuts and bolts about your credit report.  


Lenders don’t just look at your credit history & credit score…

 When seeking approval for your loan application a range of factors are taken into consideration. Effectively these factors paint the picture of your spending, saving, borrowing and repayment behaviour. Indicators and a selection of influencers may include;

  • Your income; including how much and how often you are paid. This is key particularly if you are self-employed or do not receive regular income.
  • Your expenditure, spending habits and patterns for automatic payments, direct debits etc.
  • Your savings habits, including your savings to income ratio
  • Your level of debt


Steps you can make to improve credit and your worthiness to prospective lenders.

One simple missed payment is all it takes to put a black mark on your record and a knock to your credit score. Likewise, more extreme actions including defaults on payments, bankruptcy and any other factors that ‘paint the picture’ and indicate that you are an unreliable borrower will cause major impact on your ability to borrow money from lenders. Actions speak volumes here. Aim to correct and improve your financial actions to make yourself more appealing in the eyes of the lender.


Some quick fixes to improve your credit worthiness;

  • Check your credit report often (annually). You can do so for free at Equifax, Illion (formerly Dun & Bradstreet), & Centrix
  • You can also obtain your credit score free online via Credit Simple. Credit Simple is owned by Illion and extracts its data from there.
  • Don’t ever be late on credit repayments or miss repayments. To avoid this, set up direct debits to repay the full balance of credit each month. If you cannot make full repayments pay the minimum at very least. Contrary to popular belief paying only the minimum balance on your credit card will not harm your credit score however, the interest you will pay will soon accumulate which is not advised.
  • Aim to avoid co-signing agreements. Eg flat accounts where everyone’s name is linked to the power, lease or Sky account. If any of these payments are late then your credit score may suffer. The same can be said of relationships where couples co-sign on subscriptions, loans or credit card arrangements.
  • Only make applications when you require credit. ‘Shopping around’ to seek the best deal and offer is not a good look in the eyes of the lender. This may actually result in your credit score suffering as an entry is made on your credit file each time you apply.
  • Avoid payday loans. Click here to read why payday loans are bad. The interest rates here are massive and outweigh the potential benefits you may reap.


Final Say

The purpose of credit scoring is to predict future behaviour. A credit report and credit score don’t decide whether you will be accepted for a loan; your personal details provided in your application play a significant part. The credit report and credit score act to serve lenders, to assist lenders in making a decision whether your application will be accepted.

If you have bad credit, borrowing money is not, and does not have to be impossible. Can you get a personal loan with bad credit in New Zealand? Yes, there are options available with many lenders aiming to appease.  It comes with the territory. With bad credit comes a greater degree of risk, which is taken on by the lender if the borrower is unreliable and cannot meet the obligations of the loan agreement. The consequence here may be a loan with a heightened interest.  Some lenders may be entirely reluctant to offer their financial services if you have bad credit. This may limit your options but ultimately this does not exclude you from the market.


For more information check out What you need to know and tips to boost your credit profile


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