Bad Credit Credit Cards

Bad credit credit cards explained

Can I get a credit card with bad credit?

It’s possible to get a credit card if you have a bad credit history, but you are likely to find it more difficult to get the most competitive deals and have fewer options to choose from than someone with a better credit history.

Furthermore, while there are deals available for those with poor credit, there’s no guarantee that you will be accepted. All providers will check your credit history and your overall financial situation to decide if they will approve your credit card application.

What credit card can I get with bad credit?

The most competitive credit card offers are typically reserved for those with the best credit scores. However, there are many providers that offer specialist credit cards to those who have a poor credit score because of problems in the past, as well as those who haven’t yet built up a credit history as they’ve never borrowed before.

These cards may be known as credit builder cards or credit repair cards as they are designed to help people build up their credit history and improve their score. They are typically very basic credit cards without many (if any) interest-free offers or rewards.

Additonally, they are likely to come with higher interest rates and a lower credit limit than a more mainstream card.

Because of this, these cards should only be used to build up your credit history and prove that you’re a responsible borrower, to help you access more competitive forms of credit in the future.

How does a bad credit credit card work?

Credit cards for bad credit work in the same way as other standard credit cards, as you borrow money from the provider when you use the card and repay it with interest (unless you clear your balance before charges apply).

The main differences are that interest rates on these credit cards are often significantly higher than on standard cards and the credit limit is usually lower. This is because those with a poor credit history are perceived to be a higher risk by providers, so they set stricter terms to compensate for this.

For example, standard credit cards may charge an APR of 24.9%, whereas credit cards for those with bad credit may charge 34.9% or higher.

Meanwhile, the credit limit on a credit builder card could be as little as £50, or up to £1,000, depending on the provider and your individual situation. By contrast, those with a good score could access a credit limit of several thousand pounds with a standard credit card.

Some providers may lower the interest rate or allow you to increase the credit limit on a credit builder card if you consistently make payments on time.

As with other credit cards, you can use credit builder cards for spending in-store and online. Because of their lower credit limit, they are likely to be most suitable for smaller purchases and less so for larger, more expensive purchases. These cards are unlikely to be the best option for debt consolidation because of their high interest rates.

Ideally, you would pay off the balance on your credit card in full each month before interest charges apply, as this can help to build and improve your credit history at no extra cost.

If you don’t clear your balance in full, it’s crucial to make the minimum payment at the very least. Missing a payment or going over your credit limit is likely to be recorded on your credit history and cause your score to drop, instead of improving.

How to manage your credit card

If you have a credit builder card or a credit card for bad credit, it’s crucial to manage it effectively to ensure it has a positive impact on your credit report.

As long as you prove that you can responsibly manage your card (alongside any other payments and credit commitments), you could start to build up a better credit history and improve your credit score.

In turn, this can then improve your chances of being approved for a wider choice of credit cards and other forms of credit, including those with more competitive interest rates.

Below are some tips to help you manage your card responsibly that could improve your credit history.

• Pay off your credit card balance in full each month. This means you won’t be charged any interest and proves you can stay in control of your spending.
• Don’t miss any payments. If, for some reason, you’re unable to clear your balance, it’s crucial that you make at least the minimum payment, ideally more. You can set up a Direct Debit to ensure you don’t forget.
• Aim to use the card for your everyday, affordable expenses. These cards aren’t as suitable for borrowing money to spread the cost of large, expensive purchases because of their higher interest rates.
• Stay well within your credit limit. Keep your spending small and don’t get tempted to overspend and max out your card.
• Don’t use them as a way to borrow more and build up debt. This is likely to be expensive for you and could affect your credit score.
• Never use these cards to withdraw cash. Using a credit card for cash withdrawals may come with a fee and interest is often charged daily, making it a potentially very expensive option. Furthermore, any credit card cash withdrawals are recorded on your credit file and could harm your score.

Bear in mind that, while managing a credit builder card responsibly can have a positive impact on your credit score, it’s important to manage the rest of your finances effectively and make any other payments in full and on-time.

Furthermore, try not to apply for any more forms of credit as you try to improve your score, as this could affect your progress.

What banks offer bad credit credit cards?

A range of providers offer credit cards for those with bad credit, but the choice of options is likely to be more limited than for someone with a better credit history.

Some major banks offer credit builder cards but, depending on how bad your credit history is and the reasons for it, you may find that many well-known banks and brands won’t be able to approve your application.

As a result, you may have to consider more specialist providers that focus on helping people with less-than-perfect credit scores.

See our chart above to compare the credit cards that may be available to those with a less-than-perfect credit history.

What is the easiest bank to get approved for?

No bank or provider is necessarily easier to get approved for than another as the outcome of your application will depend on your individual circumstances and the requirements of the provider.

However, if you have a bad or limited credit history, you’re likely to find it easier to get a credit card from providers that offer specialist credit cards for these borrowers, rather than standard cards that are targeted at those with good credit scores.

What do we mean by a bad credit score?

A bad credit score means your credit score is at the lower end of the scale, indicating you may have previously had problems making payments and managing your debts.

However, it’s important to note that there isn’t one single number that signifies a bad credit score as credit reference agencies (CRAs) have different scoring systems. Each of the main CRAs class a bad or poor credit score as the following:

• Experian: 0-720
• Equifax: 0-438
• TransUnion: 0-565

You can check your credit report for free as many times as you want, without affecting your score. This can help you check your current creditworthiness, identify any areas for improvement and spot any errors or mistakes that could be harming your score.

Why do I have bad credit?

There are several reasons why you may have a bad credit score, including:

• too many applications for credit in a short space of time
• late or missed payments
• only paying the minimum payments on your credit card
• going over your credit limit on your credit card
• a high credit utilisation ratio (when you use too much of the credit available to you)
• having an individual voluntary arrangement (IVA), county court judgement (CCJ), debt relief order (DRO), bankruptcy or similar on your credit file.

Sometimes, a low credit score can simply mean that you have never used credit before. You need to have a history of using and paying back credit to build up a credit history and a good score. If you have never applied for credit, then there will be no data to score you.

It’s also worth bearing in mind that fraudulent activity can cause your credit score to drop, which is why it’s so important to regularly check your credit file.

What should I look for when choosing a credit builder card?

When comparing credit builder cards, or credit cards for bad credit, there are a number of features to consider.

The interest rate is one of the key factors to look at because, while you should aim to clear your balance each month to avoid paying any interest, you should know how much you could be charged if you don’t pay off your card.

You can look at the annual percentage rate (APR) to help you compare the total cost of different credit cards, taking into account the interest rate and any fees. However, it’s important to note that you’re not guaranteed to receive the advertised APR (known as the representative APR); the actual rate you receive will depend on your credit history and financial circumstances.

It’s also worth seeing if any cards come with any extra perks, such as an interest-free period or a reward scheme.

Crucially, you should also look at the eligibility criteria of a card to make sure you choose a card that you qualify for.

What if I’m refused a credit card?

If your application for a credit card is refused, don’t try to apply for another card straightaway. Because all applications for credit are recorded on your credit file, applying multiple times over a short period could harm your score and chances of approval.

Instead, check your credit history to see why the provider may have rejected your application. This will also help you identify any areas for improvement, which could help boost your chances of approval next time you apply for credit.

Ideally, you should only reapply for a credit card at least three to six months after your previous application. Before applying, check the requirements of the card to make sure you qualify and, if possible, check your eligibility to see your chances of approval without affecting your credit score.