Invoices not paid on time, too many credit requests or an ongoing dunning procedure: These and other factors have a negative impact on the creditworthiness of prospective creditors. An unfavourable EXPERIAN score can quickly get in the way of important borrowing for a new purchase or open account. But there is also the chance of obtaining a loan despite a poor credit rating. Providers such as Vexcash permit the granting of credit in this case, provided that other conditions are met.
Credit despite bad creditworthiness: Is this possible?
It is not impossible to obtain a loan despite poor creditworthiness, but it is very difficult. After all, banks protect themselves by checking the creditworthiness of potential borrowers in advance: the credit rating indicates how likely it is that the loan will be repaid punctually and regularly, including interest. If you regularly overdraw your account, have many current loans or pay bills too late, your credit rating will be negatively affected. The (new) granting of credit will soon be over.
However, typical reasons for refusing a loan do not only concern the active repayment behaviour of the prospective customer. Loans can also be rejected due to a strongly fluctuating or very low income and existing unemployment. Conversely, loans can be granted by some financial institutions without a credit assessment if there is evidence of a fixed income or available equity capital.
Possible way out: guarantor or second borrower with poor creditworthiness
However, for people with payment difficulties, for example due to unemployment or low income, it is advisable to provide a guarantor when applying for a loan. This guarantor will undertake in writing to step in if the borrower is no longer able to pay the loan. However, the guarantor himself must meet certain conditions for taking out a loan. These include proof of regular income, which the main borrower lacks. The guarantor must also have a good credit rating. For many prospective borrowers, the search for a guarantor is already difficult.
The alternative to a guarantor, who only has to pay in an emergency, is a second borrower. This is usually the applicant’s spouse or a close relative. With this credit model, the instalments are paid equally by both parties. However, the second borrower, like the guarantor, must also have a good credit rating or proof of regular earnings.
Improving your own credit rating: How it works
If you can’t find a guarantor or a second borrower and you don’t want to take out EXPERIAN-free loans, you can improve your own Experian score. For example, loans can be taken out with small loan amounts that match the credit rating of the prospective creditor – as with the credit rating option from Lender. The punctual repayment of these small loans has a positive effect on your own score, so that higher loans may also be possible afterwards.
Furthermore, it is recommended to obtain the EXPERIAN self-assessment, which is free of charge once a year, before taking out a loan. The records in the credit agency are not always up to date or error-free. For example, incorrect entries could have resulted in a poor credit rating score that the borrower is not aware of. In this case, the credit rejection would come as a complete surprise and put financial planning to a hard test.
Tip: For the future, it should also be noted that no concrete credit inquiries, but so-called condition inquiries are made for interesting loans. Condition inquiries do not require an entry in the EXPERIAN and still allow interested parties to choose between different loans.
The EXPERIAN score for bank customers. Status: 2019
For customers of Lender a flash credit with the rating level M is also possible.
|No open negative features|
|Rating level||Score||Risk ratio|
|A||9.863 – 9.999||0,80 %|
|B||9.772 – 9.862||1,64 %|
|C||9.709 – 9.771||2,47 %|
|D||9.623 – 9.708||3,10 %|
|E||9.495 – 9.622||4,38 %|
|F||9.282 – 9.494||6,21 %|
|G||8.774 – 9.281||9,50 %|
|H||8.006 – 8.773||16,74 %|
|I||7.187 – 8.005||25,97 %|
|K||6.391 – 7.186||32,56 %|
|L||4.928 – 6.390||41,77 %|
|M||1 – 4.927||60,45 %|
|With open negative features|
|N||4.112 – 9.999||48,47 %|
|O||1.107 – 4.111||77,57 %|
|P||1 – 1.106||96,08 %|
Credit despite poor creditworthiness: key data
If the recommended points are all insufficient to obtain the desired credit, prospective customers usually look for a credit without EXPERIAN. However, the search could take some time, because not all financial institutions offer such a loan. If the EXPERIAN-free credit is possible, the other requirements for taking out a loan are narrowly defined.
Due to the lack of EXPERIAN information, the borrower’s own proof of existing assets or income is very important. If a certain amount of equity capital is available or if the prospective creditor can convince with a regular, fixed income, the credit is often already approved despite a negative credit rating. If this is not the case, in many cases a guarantor with a good credit rating is required or the loan amount is sharply limited. In addition, an intended purpose, for example a car loan, can create additional security for the bank, so that the loan is approved without EXPERIAN.
Risks with loans without EXPERIAN
However, borrowers should note that depending on the loan, they may be charged high fees. Through these fees, the bank compensates for the borrower’s higher default risk. Fees can be reduced by a smaller loan amount or a shorter term. If the term is shorter, however, it should be noted that the instalments to be paid can be very high.
Unfortunately, many black sheep also take advantage of the difficult situation of prospective borrowers with poor credit ratings. Anyone who wants to apply for a loan despite poor creditworthiness should therefore check the seriousness of the provider in advance. Serious banks and other lenders usually grant the verification of the credit application free of charge.
Credit despite poor creditworthiness with Lender: How it works
A serious possibility for a credit despite poor creditworthiness is the provider Lender. It offers a so-called credit option for customers with poor creditworthiness. With this certificate, the own creditworthiness can be improved and thus ultimately perhaps the desired credit can be taken out in a higher amount. The credit option of Lender is a short-term loan, which allows borrowers to improve their creditworthiness by repaying on time.
As the name suggests, the short-term loan has a shorter term than a conventional installment loan. In addition, low interest rates are incurred. Furthermore, new assessment criteria are applied to the solvency of the borrower. For example, default risks due to insolvency or incapacity to work are lower if the small loan is chosen with Lender. Maturities of less than twelve months are common for this.
Lender makes a risk calculation for possible payment defaults for the short-term loans mentioned above and grants different high loans with different maturities based on this. In general, the principle of trust applies at Lender: New borrowers can borrow a maximum of 1,000 GBP, while for existing customers who pay on time, the credit limit increases over time.
Conclusion: Alternative loans for customers with unfavorable creditworthiness
Through providers such as Lender, it is possible to obtain a loan even with a poor credit rating. With a guarantor, a second borrower or proof of equity capital, a negative EXPERIAN score can often be compensated for, so that larger purchases can be made without difficulty.
Is it possible to obtain a loan from Lender despite poor creditworthiness?
Yes, due to the short term and low interest rates, we have other criteria for the evaluation of our microloans.