It can be difficult to borrow money cheaply if you’ve got poor credit or no credit. But specially designed credit cards for bad credit, or no credit, are designed for people just like you.
Fortunately, there’s a whole market dedicated to credit cards for bad credit. Even better, by using these cards regularly and paying them off on time, you can quickly improve your credit score to help you get the best deals when you apply for other products.
Credit builder credit cards can also be called ‘bad credit cards’ or ‘poor credit cards’. They are also more commonly known as credit building credit cards.
Typically, credit builder cards are easier to get approved for as they have more lenient eligibility criteria. This means you can get one even if you have bad credit, are on a low income, or have a County Court Judgment (CCJ) on your record.
For this reason, credit builder cards have higher interest rates and lower credit limits as providers look to reduce their risk.
Credit builder cards should be used as tools to improve your credit. Use them for daily expenses and pay off the balance in full to get the most out of them.”
Credit building credit cards can be a good idea if you're trying to improve your credit score or cannot qualify for better deals in the market. Some reasons for that might be:
You have no history of borrowing or have never had a credit card before
You have a record of missed payments
You've declared bankruptcy in the past
You've had a CCJ against your name
Using a credit builder card carefully could improve your credit record. To do this, you must make all your repayments on time and stay within your credit limit for several months – typically about six months. This also means staying on top of your other bills and not missing payments.
Paying back what you borrow on time looks good to banks and other providers, even if you’ve had debt problems in the past. Credit builder cards are a good way of proving you can pay back what you borrow. So the next time your finances are looked into, lenders will see you've made a conscious effort to repay your debts.
Having one of these credit cards to build credit should make it easier for you to get accepted for credit cards, loans or mortgages in the future. You’ll also have more options open to you, so you’ll have a better chance of getting the best deals on the market.
To find the best credit cards to build credit, you can use our CardFinder tool to match you with the cards you are most likely to get.
Instead of having to go through all the different deals yourself, CardFinder uses the details you provide about your circumstances and matches you with the cards you have the best chance of being approved for.
It doesn't affect your credit score, and you can pick the ideal card from a more manageable selection.
When you get the results from CardFinder you’ll be able to compare the deals available to you.
There are two main things to consider here - the interest rate and the credit limit. You’ll often find that credit building cards advertise a minimum credit limit, which is the lowest credit limit you'll get if approved. Similarly, there is a maximum credit limit.
However, credit limits tend to be lower compared to standard credit cards, and interest rates tend to be higher. If you use your credit card carefully, your credit limit might increase over time.
Once you've chosen the deal you like, fill out an application form.
Typically, you'll have to provide your name and contact details, as well as some basic financial details.
Make sure the details you provide are accurate, as incorrect information could lead to you being rejected.
After that, it can take up to two weeks to receive your card once approved.
Follow these tips, and you'll be well on your way to improving your credit score:
Use CardFinder. Use our eligibility tool before you apply to help you find the cards you’re most likely to be accepted for.
Avoid multiple applications. Don’t apply for cards you’re not likely to get, and don’t make multiple applications, as this can make you look desperate for credit.
Use credit builder cards carefully. Always try to pay the balance in full to avoid paying interest, and make repayments by the due date. Stay within the credit limit too.
Be patient. Building your credit score takes time and effort, and it can take six months or so to see a change. You can sign up with any of the three credit reference agencies (CRA) to track your credit score.
Credit builder credit cards tend to charge high rates of interest, making it important to pay off your balance in full each month. That way you won’t ever have to worry about paying interest.
If you can’t pay off the full balance, clear as much of it as you can afford to as interest will be charged on whatever is left over.
Whatever you do, it’s crucial that you pay at least the minimum amount stated on your credit card bill each month. Failure to do so will result in a late payment fee of around £12 and it will also leave a negative mark on your credit file. If you’re worried you’ll forget, set up a monthly direct debit for the minimum amount so that your payment is made automatically.
Be warned that only paying the minimum amount will mean you pay a lot more in interest and it can take a very long time to repay your debt.
If you use your credit card for small purchases, you’ll find it much easier to stick within your credit limit and you won’t have as much to repay each month. Making small purchases regularly and repaying them quickly can help you to rebuild your credit score.
Using a credit card for cash withdrawals means you’ll usually incur a cash advance fee, plus interest will be charged from the date of the transaction – even if you pay off your balance in full that month. This makes it a very expensive option and should be avoided (unless it’s an emergency).
These are loans aimed at those with bad credit.
Interest rates on bad credit loans are much higher than other kinds of personal loans, making them an expensive alternative.
However, these could be an option if you need to borrow more than may be possible with a credit builder card.
These are loans where you get a close friend or family member to act as guarantor, who agrees to repay the loan for you if you're unable to.
Even though guarantor loans have high interest rates, you may be able to borrow a larger sum because the lender has added security that the loan will be repaid.
Being a guarantor is a major commitment and whoever agrees to be the guarantor should be aware of what it means. They'll also need to have a good credit score and be a homeowner.
Credit unions offer savings accounts and loans to local communities. They are often low cost and significantly cheaper than short-term lenders. If there's one in your area, they could be a good option for a small loan (usually under £3,000).
To borrow from a credit union, you may have to become a member. Some require you to start saving with them first.
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 your credit limit at any time.
Credit limits are awarded 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 your guide on 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 see 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. Read more about Direct Debits in our guide.
Minimum eligibility criteria define the attributes the provider expects customers to have before offering them a product. It's 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 like CardFinder 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.
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.
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