Can I get a loan after bankruptcy?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
29th November 2021
3 minute read
- Yes, but only for small amounts
- Any loan over £500 you will have to declare you’ve made bankrupt
- This will usually lead to a rejection
- Bankruptcy will stay on your credit file for up to 6 years
Applying to borrow money can often be a difficult process, especially if you’ve had trouble managing your debts in the past. If you’ve been declared bankrupt, this can harm your chances of borrowing, but does not make it impossible to be accepted in the future.
We’ve put together some useful information on getting a loan after bankruptcy and what you should watch out for when attempting to borrow money. Read on to find out how you can navigate the pitfalls of applying for a loan with a bad credit score and previous bankruptcy.
Can I get a loan after bankruptcy?
Yes, you can, but any amount over £500 you will have to declare your bankruptcy and you will usually be rejected.
Whilst it isn’t impossible to borrow money after you’ve been made bankrupt, you will have to declare this to lenders for a period of up to 12 months or until your bankruptcy has been discharged.
In addition, bankruptcy will remain on your credit file for up to six years, meaning you will struggle to borrow money within this period as you will be seen as less creditworthy.
How does bankruptcy impact my credit?
Bankruptcy will inevitably have a negative affect on your credit score, but you are likely to see your credit score drop before then, especially if you are in debt and unable to keep making monthly payments.
After you have been declared bankrupt your credit score will usually reflect this, so be prepared to have a bad or very poor credit score. This will make it much more difficult for you to be accepted for any sort of credit, especially for any amounts over £500 where you will have to declare your bankruptcy.
Will it be difficult to get a mortgage with the bad credit?
Getting a mortgage is the largest amount you will borrow in your lifetime and since you will have to declare your bankruptcy to the lender, you will most likely be rejected by most major mortgage providers.
There are specialist mortgage providers who allow those with a bad credit score to still get a mortgage, but with a much higher interest rate. Therefore, you may want to make enquiries as to whether they would also accept previously bankrupt customers. This could depend on how long ago the declaration was made, so it’s always worth checking.
Alternatively, you will have to build up your credit score and wait for the bankruptcy to disappear from your credit file after 6 years. Whilst this can take a long time, it’s the best way of getting a good interest rate on a mortgage deal, meaning you can make affordable monthly payments and avoid building up any debt for the future.
How can I repair my credit history?
There are several ways you can build up your credit score again, which is worth doing as you near the end of your 6-year bankruptcy period, especially if you plan on applying for a mortgage or a large personal loan.
Try performing the following actions to make improvements to your credit score:
- Check your credit report – this will give you an indication of what your credit score is and how you make quick fixes to boost your credit score
- Register to vote – if you haven’t done so already, registering to vote at your permanent address should improve your credit score and you will be seen as more creditworthy
- Disassociate yourself from people or addresses – if you are associated with someone who has a bad credit score through a joint account or at a previous address, your score can also be affected
- Get a credit builder card – if you spend a small amount and return the balance to £0 every month to ensure you aren’t paying any interest, you will gradually build your credit score up
- Get a credit builder loan – this is a way of saving money and building your credit score over the course of 12 months. Choose an affordable amount to save and it will be treated like a loan you slowly pay off, improving your credit score
Find out more ways you can build your credit score by reading our article, taking steps to improve your credit score. Alternatively, take a look at our Bad credit loan page, to find out more information on applying.