Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk

If you have had problems with managing credit in the past and your credit score is less than perfect, then you may well have given up on the idea of obtaining a credit card any time soon. However, there are credit cards available for customers with a poor credit score - and what’s more - they can be useful to actually improve your credit score over time.

Read our guide below to find out more about credit cards for bad credit.

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What is a bad credit credit card?

A bad credit credit card could also be referred to as a credit building credit card, but the two are essentially the same thing - a credit card that is issued to someone with a poor credit score or no credit score, that - if managed correctly - can help to build or rebuild a credit profile.

There are generally two reasons someone may have a poor credit score, they either have no credit history (because they have never taken out a lending product such as a loan or credit card before), or they have had issues in the past with managing and repaying credit on time.

In both of these scenarios, the individual may have trouble accessing credit – particularly low-cost credit – and so it can seem to be something of a catch 22, “how can I improve my credit score if I can’t access any credit?”

This is where a credit building card may come into play. These cards are specifically created with poor credit applicants in mind, so even if your credit history isn’t particularly great, you are more likely to be accepted than if you were to apply for a mainstream, low cost, credit card.

What are the disadvantages of a Credit Card for bad Credit?

The main disadvantages are that these types of credit card come with:

A high APR - The lowest interest rates on the market for standard credit cards are typically in the 10% – 20% APR range for purchases. Credit building credit cards are more likely to be in the 30% - 40% range.

Low credit limits - Typically, these cards will come with a low credit limit in the region of £1,000 - £1,500.

From a lenders point of view, both of these limitations are understandable – if the applicant has a history of not managing credit well, or no history at all, then they represent a greater risk to a lender than someone with a good track record of meeting their repayments on time and in full.

In order to mitigate that risk, credit providers have to increase the interest that a poor credit applicant must pay and/or offer lower amounts of credit.

What are the advantages of a credit card for bad credit?

On the flipside, there are a few key advantages to these types of credit card:

Higher rate of acceptance.

Access to credit which may otherwise be difficult to obtain.

Chance to build or rebuild your credit score.

How does a bad credit credit card help me improve my credit score?

Let’s be clear – even with a credit card for bad credit, if you fail to meet your repayments on time then you stand to damage your credit score even further.

But if correctly managed, these types of card can help you improve your credit profile. As long as you meet all of your minimum repayments and are paying on time, then you will demonstrate to prospective future lenders that you can be trusted to handle credit correctly and your credit score could increase as a result.

Even better, if you can pay more than the minimum monthly repayment and clear your balance each month, you will not have to pay any interest and could expect your credit score to increase even further.

These types of cards can be viewed as a chance for you to demonstrate to credit providers that you can be trusted to manage your finances well and can be considered for better credit offers in the future.

Will applying for a bad credit credit card damage my credit rating further?

If you apply for one of these cards and are declined, then yes this could damage your credit score.

However, most card providers offer some form of eligibility check that enables you to see up front what your chances of being accepted for the card are without damaging your credit score.

They achieve this by carrying out a soft search on your credit profile. Unlike a ‘hard’ credit check, a soft search leaves no footprint on your credit history that can be seen by other lenders and will not hurt your credit score. See this article for more information on the difference between soft and hard credit checks.

Should I get a credit building credit card?

No one can tell you if you should/shouldn’t apply for one of these cards – the decision ultimately needs to be made by you after careful consideration. However, if you:

Have been rejected for credit elsewhere

Have a poor credit score and are keen to improve this

Are confident that you can at least meet the minimum repayment each month

You won’t exceed your credit limit.

Then a bad credit credit card could help you build/rebuild your credit score and improve your financial standing in the long term, allowing you access to greater amounts of credit and lower interest rates.

How else could I improve my credit score?

As well as utilising a credit builder card, there may be other steps you could take to improve your credit profile. These include:

Ensuring you are on the electoral roll. By registering to vote (which you can do by clicking here) you are providing proof of your address that can give prospective lenders greater confidence.

Ensuring the details on your credit profile are correct and up to date. You need to make sure your credit report doesn’t contain any errors. Access your credit report at the three main UK credit reference agencies Equifax, TransUnion and Experian and ensure that the name and address details are correct, there are no associations on there that shouldn’t be and there are no other obvious errors. If you spot anything that needs correcting, raise a dispute with the credit agency in question to get it changed. Read more about raising credit report disputes here.

Avoid moving home too frequently. Lenders like to see a stable address over a period of years.

Pay phone / broadband bills on time. Ensuring these bills are cleared on time is a simple way of demonstrating you are managing your money effectively.

This is just a selection of actions you could take, for a more comprehensive guide on this topic, see this article at Moneyhelper.org.uk.

CashLady Representative 79.5% APR

Representative Example

Amount of credit:
£1000 for 12 months
at £123.40 per month
Total amount repayable of £1,480.77
Interest: £480.77
Interest rate: 79.5% pa (fixed)
79.5% APR Representative

Warning: Late repayment can cause you serious money problems.
For help, go to moneyhelper.org.uk

Check your eligibility now

Why not check your eligibility for a credit card risk free with our friends at thimbl. Get a response in 60 seconds and check your chances before you apply.

Get your personalised quote today!

How much do you want to borrow? Representative 79.5% APR

CashLady Representative 79.5% APR