Lenders take into account different risk factors depending on your age. For example:
Young people are also more likely to have a poorer credit score because they’ve not yet had the chance to build it up.
Getting a loan when you're younger might be more difficult, but there are ways to improve your chances of being approved by lenders.
For almost all lenders it’s 18, although some require you to be 21 or older. So it’s likely that a personal loan may be your first experience of debt.
You might already have a student loan. But these are repaid while you're working, so they wouldn't count towards your credit history just yet.
The younger you are the less time you’ll have been working, which would add to your perceived risk level and make some lenders reluctant.
Getting any other forms of credit, such as a credit card, might be trickier the younger you are, too.
What you intend to use a loan for can factor in to your eligibility too.
Student and career development loans are designed to help further your career by funding your studying. They’re tailored to those who’ve finished their main studies and are looking to pay for further education.
Even if you don’t complete your studies, you’ll still need to repay the loan.
Interest rates may be higher. Lenders need to account for the risk because of your age.
More flexible terms may be on offer with one of these, than you’d get with a less specific personal loan.
Guarantor loans are designed for people with poor credit scores. Younger people are usually included in this group.
A friend or family member agrees to act as your guarantor. This means they’ll be responsible for paying off the loan if you fail to do so. Both of your credit scores will be impacted by this.
A credit score is a numerical reflection of how well you manage your finances. More specifically, it shows how reliable you are when it comes to paying back credit, such as through a loan, credit card or mortgage,
There's not actually one 'score' as such. Each lender will look at your credit profile and score you against their own criteria when they decide whether to offer you credit.
You can improve your chances by proving you can responsibly handle debts, direct debits and other long-term financial commitments. Even just paying certain household bills on time can help improve your credit score.
Your credit score can also get better by having a fixed address and registering on the electoral roll.
Young people are less likely to have a fixed residence – for example, if you move between student accommodation and your family home. So it may be a while before you can improve your credit file this way.
Credit report companies will sometimes show you an indicative score to give you an idea of your creditworthiness. Whether you’re planning on applying for a loan or not, it’s worth keeping an eye on your credit score.
Check your credit report to see what’s holding back your score and what you can do to improve it. This will help you better manage your finances. It’ll improve your eligibility for any future credit applications, too.
No credit means you don’t have a credit history. For example, because you haven’t taken out credit before. Those with low credit ratings have previously been unreliable when it comes to paying back money owed and so their credit score has suffered.
Having no credit is slightly better than having poor credit. It’s easier to build your score up from scratch rather than rebuild credit. However, they both make getting loans with reasonable rates tricky.
This doesn’t mean you can’t get a loan, but it does limit your options.
Lenders who do offer loans to those with a low or no credit rating will usually only be able to offer higher interest rates and lower maximum loan limits. This is because the lender views you as a greater risk than someone with a higher credit rating.
You can improve your credit score by:
If you do get credit, make sure you can afford the repayments to gradually build up your credit history
Each will leave a 'footprint' on your file and frequent applications will put off lenders as well as slightly lower your score
Lenders like to know that you have a fixed place of residence
You can sometimes check your eligibility for a loan or other credit application without it negatively impacting your credit score – this is usually called a soft or smart search.
Lenders will also check other affordability criteria like your salary when they measure your eligibility, so your credit rating isn't the only thing to keep in mind
One alternative to a loan is a credit card. Some come with a 0% interest period, but make a note of when the interest-free period ends though. If you fail to repay the outstanding balance before it finishes you'll begin to pay interest, which may be at a high rate.
You can also get student credit cards, which work the same way as a regular one, but may also offer some perks that are relevant for students.
If you have a bad credit score, you may be able to get a credit card tailored for this. These cards may be able to help you build your rating back up, but you won't get a huge credit limit and the interest will likely be high.
If you have a current account with an overdraft you could see if your provider is willing to extend it. However, the fees and charges could be very high if you exceed your overdraft limit.
Alternatively, you could simply save up the money you need. This means you won’t have to get into debt at all.
Weigh up the pros and cons of all your options.
If you’re struggling with debt, speak to your lender first. You can also contact your local Citizens Advice, National Debtline or StepChange Debt Charity for free advice.