Credit Score Basics > What influences your chances of approval for a loan?

What influences your chances of approval for a loan?

Wollit Team4 minute read · Updated 2nd July 2024

The best way to see your loan chance of approval is to use a pre-approval or eligibility checker.

Using these before applying is a good idea because eligibility checkers only run a "soft check" on your credit report. This soft check only tells you which products you will likely be approved for and does not count as a credit check.

This is important because having many "hard" credit checks on your credit file can hurt your credit score and signal to lenders that you might struggle financially. A soft check like the one run by eligibility checkers, on the other hand, does not hurt your credit score at all.

Also, keep in mind that any pre-approved, "approved in principle", or eligibility percentage you might get using any of these tools does not guarantee that you will get that loan. If you proceed with a lender, they will still have to run a separate hard credit check as part of the application process.

Where can I see my chances of getting approved for a loan?

There are many websites where you can see your chances of getting approved for a specific loan.

Most banks, lenders, and credit companies will have an eligibility checker on their website. However, if you want to compare offers and see which product you're most eligible for, then you can choose from one of these places:

Money Supermarket
All Purpose Loans
Aro
Compare The Market
Even the CRAs themselves offer a tool like this: Experian, for example, lets you compare offers from 40 banks and lenders.

What do the pre-approval percentages mean?

If you use an eligibility checker, you'll often be shown a "pre-approval" percentage.

The definition may change from website to website, but this is what pre-approval percentages usually mean:

100% pre-approved: You'll almost definitely be approved for that loan if you decide to apply. You might only have to go through fraud checks.
90%—99% chance of approval: You're very likely to be approved, but in some cases, the lender will still need to do a few quick checks to fully approve your application.
80%—89% chance of approval: There is still a good chance you'll be approved. However, there is a slight risk you'll be declined if you proceed. The number or duration of checks might increase slightly.
Below 80% chance of approval: The risk of being declined is quite high. You may want to check if there are any easy ways you can quickly improve your credit score first—for example, by registering to vote.
No specific percentage: in this case, the tool can't give a result because you didn't provide sufficient information. This may happen if you have a "thin credit file", or for other reasons.

Will being rejected hurt my credit score?

A low pre-approval percentage on an eligibility checker will not hurt your credit score. It's just a soft search, not different from when you have a look at your own file.

But if you proceed, any loan application will be recorded on your credit report—regardless of whether you get the loan.

In other words, it's not the approval or rejection that matters—but how many hard credit checks you have on your credit report.

This is why eligibility checkers are helpful—they prevent you from making too many loan applications by showing you only the loans that you have a strong chance of getting.

What credit score do I need for a loan in the UK?

There is no set minimum credit score for a loan in the UK. Each lender will have their own threshold.

That being said, the three credit reference agencies (Equifax, Experian, and TransUnion) split their credit score range into different "bands", which can give you an idea of how lenders see your credit score.

Here is how high your credit score needs to be to qualify as "at least good":

Experian: anything between 881 - 960 is good; above 961 is excellent.
Equifax: anything between 531 - 670 is good; above 811 is excellent.
TransUnion: anything between 604 - 627 is good; above 627 is excellent.

To avoid getting rejected, these agencies also mark certain ranges in their credit scores as "poor". You should avoid making loan applications while your credit score is in this range:

Experian: under 720;
Equifax: under 530;
TransUnion: under 565.

Having a credit score lower than this doesn't mean you'll get rejected automatically. Lenders will also look at your income level, employment status, and even your debt-to-income ratio when deciding whether you get approved.

There are also loan options for people with bad credit. Some might require additional guarantees, and the majority will charge very high interest rates and fees—but they do exist.

How can I improve my chances of getting approved for a loan?

To increase your chances of getting approved for a loan, you should do five things:

Always use an eligibility checker first so you don't accidentally harm your credit score by applying to too many loans.
Get a job. Unfortunately for the self-employed, most lenders value the stability and predictability of a good old 9-to-5.
Ask for a raise. Your income level is also a big factor.
Check your credit report and fix any errors you might see in there. Sometimes, your credit score might be lower for things that are simply mistakes or even because of fraud. If you see anything that is off, the credit reference agencies will help you fix it.
Finally, take steps to improve your credit score. You can do this by registering to vote, not using more than 30% of your credit card limit, and even using credit-building tools.

Credit-building tools can help you boost your credit score by showing potential lenders that you are a responsible borrower who makes repayments on time.

Some examples of credit-building tools available in the UK:

Credit building cards: a great option, although you need to be careful not to exceed the credit limit, as most have very low limits (usually under £1,000). They also have incredibly high interest rates and fees—we've seen credit building cards advertising a 60% APR.
Experian Boost: a much safer option which can instantly boost your Experian credit score by making your Council Tax, ISA investments, and even your Netflix and Amazon Prime subscriptions count. The downside is that it's not an actual credit score improvement – lenders can see both your "boosted" and real Experian score, and it's up to them to decide which one to use.
Wollit: unlike Experian Boost, it can improve your real credit score. The way it works is simple: it reports your monthly subscription as a loan repayment to all three credit reference agencies, potentially lifting your credit score across the board.