This article is for general information only. It is not financial advice and does not recommend a specific lender or product.

"Bad credit" is a common phrase, but it has no single official definition in the UK. Understanding what it actually refers to can help you work out where you stand before applying for any form of borrowing.

What has changed or why this matters now

The cost of borrowing has stayed elevated over recent years, and lenders have tightened affordability checks following FCA guidance on responsible lending. That means the practical effect of a poor credit record, higher rates, declined applications, or limited product choice, is more pronounced than it was when rates were low. Knowing what sits on your credit file, and why, is a useful first step before making any application.

What "bad credit" actually covers

There is no universal bad-credit threshold. Each lender sets its own criteria. In practice, the phrase usually refers to one or more of the following on a borrower's credit file:

  • Missed or late payments, even one or two missed payments can reduce your credit score and stay on your file for up to six years, according to Experian.
  • Defaults, a formal default notice is recorded when a lender closes an account due to non-payment. Defaults remain on your file for six years from the date of default, regardless of whether you later repay the debt.
  • County Court Judgements (CCJs), a CCJ is a court order for an unpaid debt. It appears on the Register of Judgements and on your credit file for six years, unless you pay in full within one month of the judgement date.
  • Individual Voluntary Arrangements (IVAs) and bankruptcy, these are formal insolvency measures. Both are recorded on your credit file and can significantly restrict your borrowing options for several years.
  • High credit utilisation, using a large proportion of your available credit limit can lower your score, even if you have no missed payments.
  • Limited or no credit history, having very little borrowing history can produce a low score, sometimes called a "thin file". This is common for young adults or people new to the UK.

MoneyHelper notes that there is no shared credit blacklist between lenders. One lender may decline you while another accepts the same application, because they each weight your file differently.

Risks and warnings

If your file shows defaults, CCJs, or a recent IVA, some lenders who do offer credit to people in this position charge significantly higher interest rates to offset their risk. Borrowing at a high rate when you are already under financial pressure can make the situation harder, not easier.

Before applying for credit with a bad credit record, it is worth considering:

  • Whether the borrowing is genuinely necessary right now.
  • What the total amount repayable will be, not just the monthly payment.
  • Whether free debt advice might be more useful than another loan.

If you are already missing payments or struggling with existing debt, a loan application is unlikely to resolve the underlying pressure. Free advice is usually the safer first step.

Free debt help:

  • StepChange: 0800 138 1111
  • National Debtline: 0808 808 4000
  • MoneyHelper: 0800 138 7777

Who may be affected

  • Anyone who has missed payments, had a default, or received a CCJ in the last six years.
  • People who have recently gone through an IVA or bankruptcy.
  • People with little or no credit history (including those new to the UK or young adults).
  • Anyone who has been declined for credit and wants to understand why.

The FCA requires lenders to carry out affordability checks before approving credit. A low credit score does not automatically mean a lender will decline you, but it often affects the rate offered or the amount available.

What to read next

Sources

  • FCA, responsible lending rules and affordability guidance.
  • MoneyHelper, credit file and credit score explanations.
  • Experian, how long negative markers remain on a credit file.
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