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APR stands for “Annual Percentage Rate” and is the total cost of borrowing over 12 months. For example, if your APR is 20%, you will be charged 20p for every £1 borrowed over the course of 12 months. If you pay your balance in full and on time, you will not pay interest.

If you don’t repay a company that’s given you credit, they can apply to county court for a judgement against you.

The judgement shouldn’t come out of the blue as the creditor will need to prove to the magistrates that they’ve tried to get you to pay up, and failed.

If they satisfy the court and one’s awarded, it’ll remain on your credit report for six years. 

A credit reference agency (CRA) is an independent organisation that securely holds data about your financial behaviour. This includes things like your name and residential address, as well as credit applications and accounts.

There are three main credit reference agencies in the UK: Equifax, Experian and TransUnion.

Your credit limit is the amount you can borrow on your credit card at any one time. If you exceed this amount, you can be charged a fee - typically £12 - and it can leave a mark on your credit report.

You won’t usually find out your credit limit until the end of an application process - although you can ask your provider to increase – or decrease – your credit limit at any time.

Credit limits are set based on your credit history and your earnings.

Once you've reached your credit limit, you need to make a payment to bring down your balance before you can use the card again. Find out more in our guide to credit limits.

Your credit report is your history of borrowing and paying bills over the past few years. Lenders send this information to one or more of the three credit reference agencies, which compile reports on UK residents.

Before deciding whether to let someone borrow, lenders check your report from one or more of the agencies. You can request a copy of your credit reports to ensure there are no mistakes on your file, request changes if you spot one and add notes explaining any missed payments.

Your credit score is calculated based on your credit history. Each credit reference agency has its own method of calculating this.

Your credit score will go up for things like making payments on time and down for things like being late or defaulting on a loan. Typically, the higher your score, the more likely you are to be offered a lower rate of interest or higher credit limit.

There is no absolute pass or fail mark attached to a credit score, with each lender making its own decision on what it considers acceptable.

If you miss a few payments, generally between three and six, your credit card provider will send you a default notice, giving you at least 14 days to pay the amount stated on the notice. 

Court action could be used to recover the debt, and if you fail to make the payment, your account will be “defaulted”, meaning you won’t be able to use your credit card anymore. It is possible that your provider may have already blocked spending on your account after the first couple of missed payments. A record of the default will also stay on your credit report for six years, making it harder to get any form of credit throughout this time.

A Direct Debit is when you give a company permission to take payments automatically from your bank account. It decides the amount, but you are free to cancel the arrangement. For example, you can set up a Direct Debit to pay off your credit card. This could be for the minimum amount due, a fixed sum, or the entire balance.

Minimum eligibility criteria define the attributes the provider expects customers to have before offering them a product. They’re designed to help customers understand if they should proceed with an application.

Meeting the minimum eligibility criteria is not a guarantee of approval. Eligibility criteria include factors such as age, salary and sometimes other details, depending on the product.

If you’ve made an application for credit, such as a credit card, loan or mortgage, lenders will carry out an in-depth check of your credit report, known as a hard credit check.

This is a detailed look into your financial history, especially your borrowing history, so a lender can see your track record of repaying money you've previously borrowed.

A hard check will show any negative marks on your credit report, like overdue payments, missed payments, previous credit applications and even bankruptcies.

Every time a hard check is carried out, it leaves a mark on your credit report, which can hurt your credit score.

Every credit card has a minimum monthly repayment amount set out in its rules, which you can find in the summary box.

The minimum payment is calculated by working out what interest you've built up over the past month and then adding a small percentage of your total balance. If you have a small overall balance, there might be a fixed sum instead - for example, £5.

As minimum monthly repayments are set at such low levels, it’s best to pay off more than this each month if you can. You’ll clear your debt faster and pay less interest too.

A soft credit check is a top-level view of your financial history. It lets lenders assess you for their offers and can show you what you could be eligible for.

Although a soft credit check is recorded, it doesn’t leave a mark on your credit file. This means that while you can see soft checks when you look at your own report, lenders can't. A soft credit check won’t impact your credit score, but you’ll be able to see if anyone has checked your credit history.

In certain industries, some employers will perform a soft credit check if you’ve recently applied for a job with them.

A bad credit score is generally a low number, but the exact score range will depend on the credit reference agency. Experian, Equifax and TransUnion all use slightly different scoring systems, but typically the lower the number, the worse your credit score. With Experian, a bad credit score is between 0 and 720, with Equifax it’s between 0 and 438, and with TransUnion it’s between 0 and 565.

Your card provider sets your interest rate (APR) based on the details you’ve provided on your application form and your credit report. Here is how interest works.

Your card provider will decide your credit limit by looking at your finances, but credit cards for bad credit usually offer lower limits. Here is how credit limits work and are decided.

No. Although a credit card might help you to improve your credit score, credit card debt is never required to build credit. You can build up a credit score by proving to lenders that you can manage your finances well. Paying your mobile phone bill or your utility bills on time and in full, for example, can help to prove to lenders that you’re a reliable borrower.

Yes, your credit record could get worse if you go over your credit limit, miss repayments, build up too much debt or apply for cards that turn you down.

Yes, you might get accepted for the above cards or those designed for bad credit and they could help you rebuild your credit record.

If you're rejected for a credit card, don't apply for another card right away. Wait at least six months and use an eligibility tool to find the right credit card for you. Applying for too many cards in quick succession can damage your credit record. Instead, focus on finding a card that will accept you.

Your credit record matters because it helps lenders decide whether to accept you as well as what APR and credit limit they are willing to offer you.

Credit cards are just one way to borrow money if you have bad credit. There are other products that may be more appropriate depending on how much you need to borrow and their eligibility requirements.

Some alternatives might be bad credit loans, unsecured personal loans, guarantor loans, credit union loans or budgeting loans.

If you’re applying for your first credit card, you’ll need to be at least 18 years old. Here is how to find a card more likely to accept you even if you have never used one before and what you need to know about using credit cards.

The best way to repay your credit card is to set up a Direct Debit to pay off the full balance each month. This means you’ll never miss a payment or pay interest. Here are all the ways to repay.