Practical guidance on borrowing options, costs and affordability when your credit score is low, plus how ClearScore can help you compare.

Key takeaways

• A low credit score may reduce your choices or lead to a higher interest rate, but it does not automatically mean a lender will decline your application.

• Lenders look at more than your score. Income, expenses, savings and existing debts all form part of the assessment[^1].

• Comparing the total cost of a loan, including interest and fees, is usually more useful than comparing the monthly repayment alone[^1].

• Applying to several lenders in a short space of time is recorded on your credit report and may lower your score, so it is worth checking eligibility first[^3].

• No legitimate lender can promise approval or ask for an upfront fee before providing the loan.

• ClearScore gives you free access to your credit report and score, plus eligibility checks that do not affect your score, although lenders make their own decisions.

In short

You may be able to get a personal loan with bad credit, although you could have fewer options and pay more interest. Each lender sets its own criteria and weighs your credit report and score alongside your income, spending and existing commitments. The most useful steps are to check your credit report for errors, work out what you can comfortably repay, then compare the total cost of any offers. Approval is never guaranteed, and a loan that is available is not always affordable.

What does a low credit score mean?

Your credit score is a number that summarises how you have managed borrowing in the past. In Australia, credit reporting bodies such as Equifax and Experian build your credit report from information supplied by lenders and other providers. Your score is calculated from that report, and lenders may use different scores, scoring models and criteria, so the score a lender sees can differ from the one you see on ClearScore.

Common factors that may influence your score include:

• Your repayment history on credit accounts such as loans and credit cards

• How much credit you have access to, and how much of it you use

• The number and timing of recent credit applications

• Defaults, court judgments or insolvency information, where recorded

• The length and stability of your credit history

A score may fall into a lower band such as Raise your game (0-299) for many reasons, including missed payments, a past default, a short credit history, or simply holding little credit at all. A low score does not describe you as a person. It reflects the information on your report at a point in time, and that information changes.

It helps to keep two things separate. Your credit report is the detailed record. Your credit score is the single number built from it. Checking both matters, because an error in the report can flow through to the score.

Can you get a loan with bad credit?

You may be able to, although outcomes vary. Some lenders focus on applicants with thin or damaged credit histories, while others set stricter criteria. A higher score also does not guarantee approval, because affordability still has to stack up.

Beyond your score, a lender may consider:

• Your income, how steady it is, and how it is evidenced

• Your regular living expenses and any dependants

• Existing loans, credit cards, buy now pay later accounts and other commitments

• Savings and general account conduct

• How long you have been in your job or self-employed

• The loan amount, term and purpose

Lenders may decline an application where repayments look unaffordable, where recent defaults are significant, where there have been many recent applications, or where identity and income cannot be verified. A decline is a point-in-time decision based on that lender's criteria, not a permanent judgment.

Check your financial position before applying

Start with your credit report and score. Australians can request a free copy of their credit report every three months, and correcting inaccurate listings may improve the likelihood of approval[^2]. Look for accounts you do not recognise, payments marked late that were paid on time, or old debts that should have dropped off. Unfamiliar accounts could also point to fraud and are worth reporting promptly.

Next, work out affordability before you look at any offers. The table below shows how a simple monthly check might be set out. The figures are examples only.

If a proposed repayment used most of that $640, there would be little room for an unexpected car repair or dental bill. Borrowing a smaller amount, or waiting, may be the more comfortable choice.

It also helps to borrow only what you need. A larger loan usually means higher total interest, even at the same rate.

Compare loan options for bad credit

People on lower incomes may have alternatives to high-cost borrowing. No Interest Loans can cover eligible essential expenses such as household goods, car repairs or education costs, with amounts and purposes set by the provider[^5]. Eligibility and affordability still need checking.

Secured and guarantor loans are not shortcuts. They shift risk onto an asset or another person, which is a serious consideration rather than a simple fix.

How to get a personal loan with bad credit

• Check your credit report and score first, and fix anything inaccurate.

• Use an eligibility checker where available. These usually rely on a soft search, which does not normally affect your score. Read the terms to confirm.

• Compare personalised offers on rate, fees, term and total repayment.

• Gather your paperwork: payslips or tax returns, bank statements, ID and a realistic expenses summary.

• Weigh up the amount and term, as both affect your repayments and the total cost.

• Read the credit contract and key facts before accepting, including default fees.

• Avoid submitting multiple full applications. Each one is recorded, and several in a short period can lower your score[^3].

How ClearScore can help you compare loans

ClearScore lets you view your credit score and report for free, and track changes over time so nothing comes as a surprise. You can also see loan offers matched to the information on your profile. ClearScore is a credit broker, not a lender.

Eligibility checks through ClearScore do not affect your credit score, because they use a soft check rather than a full application. That means you can explore options before committing.

Two limitations are worth stating plainly. ClearScore does not decide whether you are approved, and it does not set rates or fees. Lenders make those decisions using their own criteria, and the final terms you are offered may differ from an indicative match. Eligibility conditions apply to individual offers.

How much does a bad-credit loan cost?

The advertised rate is only part of the picture. A low score may mean a higher interest rate, so it is worth comparing the total cost rather than relying only on the advertised rate[^1].

Watch for:

• Interest rate and comparison rate. The comparison rate folds in most fees to give a fairer view of annual cost.

• Establishment or application fees, charged at the start.

• Monthly or annual account fees, which add up over the term.

• Early repayment or break costs, more common on fixed-rate loans.

• Default and dishonour fees, if a repayment fails.

The example below shows how term length changes total cost. These are illustrations only, not quotes or offers.

Example B has the smaller monthly repayment but costs more overall. Fees are excluded from these figures and would increase the total.

How to improve your chances of loan approval

Practical steps may include limiting new applications and paying rent, utilities and existing credit commitments on time[^4]. Alongside those:

• Correct any inaccurate information on your credit report[^2]

• Keep your employment and income details current and verifiable

• Trim subscriptions or spending that will not fit alongside repayments

• Avoid payday loans and repeat applications, which can work against you

• Consider whether a suitable co-borrower or guarantor is genuinely appropriate, understanding the risk to them

These steps may strengthen an application. They cannot promise a particular outcome or timeframe.

Responsible lending and your rights in Australia

ASIC is the main regulator for consumer credit conduct in Australia. Under responsible lending principles, a credit provider must make reasonable enquiries about your needs and financial situation, verify that information, and assess whether a loan would be unsuitable for you.

A loan may be considered unsuitable if you could not meet repayments without substantial hardship, or if it does not meet your stated needs. Lenders typically verify income through payslips, bank statements or tax records, and assess living expenses against benchmarks.

You are entitled to clear pre-contract documents setting out the amount, rate, fees, term and repayments. You can ask a lender for a copy of its suitability assessment. If something seems wrong, you can complain to the lender and then to the Australian Financial Complaints Authority at no cost.

Warning signs of predatory bad-credit loans

• Claims of guaranteed approval regardless of credit history

• Requests for an upfront fee before the loan is provided

• Interest rates, fees or total costs that are vague or hard to find

• Pressure to sign quickly or sign-today framing

• No Australian credit licence number, or details you cannot verify on ASIC's registers

• No questions about your income or expenses

• Requests for passwords, or for security well beyond the loan amount

If any of these appear, stepping back and checking the lender's licence is a reasonable response.

Alternatives to getting a loan with bad credit

• Negotiate a payment arrangement directly with the organisation you owe

• Contact the free National Debt Helpline on 1800 007 007 for financial counselling

• Ask creditors about hardship assistance, which lenders are required to consider

• Borrow from family or friends with a short written agreement covering amounts and dates

• Use savings, or delay a non-essential purchase

• Explore community finance such as No Interest Loans if you are eligible[^5]

What to do if you are rejected for a loan

Ask the lender why the application was declined, review your budget, and wait while improving your financial position rather than applying elsewhere immediately[^3]. Recheck your credit report for errors, reduce existing commitments where possible, and consider free financial counselling if debts are mounting. A decline from one lender does not reflect how every lender would assess you.

Frequently asked questions

Can I get a loan with bad credit and no guarantor? Possibly. Some lenders offer unsecured loans without a guarantor, though criteria and costs vary.

Can I get a personal loan with bad credit? You may be able to, depending on your income, expenses and the lender's criteria. Approval is not guaranteed.

What is the easiest loan to get with bad credit? There is no single answer. Secured or smaller loans are sometimes assessed more readily, but easier access can come with higher costs or risk to an asset.

Can I get a loan with bad credit and low income? It depends on affordability. No Interest Loans may be worth checking if you are eligible, along with free financial counselling[^5].

Does applying for a loan affect my credit score? Full applications are recorded and several in a short period may lower your score[^3]. Eligibility checks using a soft search generally do not.

How long does bad credit stay on a credit report? It varies by listing type. Repayment history is generally kept for two years and defaults for longer, commonly five years.

Can paying a bad-credit loan improve my credit score? Consistent on-time repayments are viewed positively over time, though results differ between individuals.

Should I use a secured loan if I have bad credit? It may lower the rate, but your asset could be at risk if repayments are missed. Weigh that carefully.

Are bad-credit loans safe? Loans from licensed Australian credit providers operate under consumer protections. High-cost short-term loans can still be expensive.

What should I do if I cannot afford my repayments? Contact your lender early to ask about hardship assistance, and consider free financial counselling.

Does ClearScore charge for my credit score? No. Access to your credit score and report through ClearScore is free.

Does using ClearScore to compare loans affect my score? Eligibility checks use a soft search and do not affect your credit score.

Does ClearScore decide if I am approved? No. Lenders assess applications using their own criteria and set their own rates and fees.

Pulling it together

Check your credit report and score, correct anything inaccurate, then calculate what you can comfortably repay. Compare the total cost rather than the monthly figure alone, use eligibility checks before full applications, and treat guaranteed approval claims with caution. Borrowing is only worthwhile when the repayments fit your life.

You can start by viewing your free credit score and report with ClearScore, and use its eligibility checker to see which loan options may be available to you without affecting your score. ClearScore is a credit broker, not a lender.

[^1]: Australian Securities and Investments Commission (MoneySmart), Personal loans: https://moneysmart.gov.au/loans/personal-loans

[^2]: Australian Securities and Investments Commission (MoneySmart), Credit scores and credit reports: https://moneysmart.gov.au/managing-debt/credit-scores-and-credit-reports

[^3]: Australian Securities and Investments Commission (MoneySmart), Loan rejection: https://moneysmart.gov.au/loans/loan-rejection

[^4]: ADF Financial Services Consumer Centre, Credit score: https://adfconsumer.gov.au/credit-score/

[^5]: Australian Securities and Investments Commission (MoneySmart), Credit, loans and debt: https://static.moneysmart.gov.au/files/publications/credit-loans-and-debt.pdf

This article provides general information only and does not constitute financial advice. Individual circumstances vary, and you may wish to seek independent advice before making financial decisions. Information is accurate at the time of writing and may change.