Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Could a bad credit credit card help you financially?
Having a bad credit score can make it harder to take out loans, mortgages or credit cards.
Learn how to improve or repair your credit rating by taking out a specialised credit card designed for people with bad credit, also known as credit building credit cards.
In This Guide:
- Bad credit score
- County court judgements
- Repair your credit score with a credit building card
- Is a bad credit credit card a good idea?
- Compare credit cards for people with bad credit
Bad credit score
Your credit score can be negatively affected by various things from late loan repayments to large numbers of refused credit card applications.
A good credit score is proof of your creditworthiness and will stand you in great stead if you want to take out any form of loan or card in the future. Conversely, a bad credit score can lead to ever increasing debt and can seriously restrict your options when it comes to taking out any kind of credit.
Nowadays, many people faced with poor credit ratings are resorting to perceived short term solutions like payday loans that can actually end up making the situation worse due to the often excessive interest rates they charge.
Steer clear of payday loans and actively improve your credit rating by spending on a low-limit credit building credit card designed for people with poor credit scores.
County court judgements
A bad credit rating can be made much worse by the enforcement of a County Court Judgement, or CCJ. Loan and utility providers and card issuers can use a CCJ to legally force a customer to repay any unpaid bills or loans when all other means have failed.
Having a CCJ on your credit report never spells good news, but you should still be able to take out a credit building card if you have one. You’ll just have to check with credit card companies to see what they’ll allow.
Repair your credit score with a credit building card
Credit building credit cards come with low spending limits and high representative APRs – typically between 20% and 70%. The idea is that both of these factors restrict the use of the card in order to promote, or rather enforce, responsible use and to prevent the holder from spending far outside of their means.
By using one of these cards and paying off the balance on time each month, you will be demonstrating your ability to use credit well, and in doing so you will improve your credit rating.
It is by no means an instant process, but by using a bad credit credit card, you can repair your credit score over time so that, in the future, you’ll be able to take out more conventional forms of loan with ease.
Is a bad credit credit card a good idea?
Credit building cards are designed for people with either bad or limited credit histories, aimed at improving their creditworthiness in the future.
There are some aspects of the way these cards work though that might make them less desirable for some.
The high interest rates are often a big turn-off for many. The idea of the high APR is essentially a deterrent – it is there to stop you from being tempted to fall behind on any payments. However, if money is tight, as is often the case with people who require credit building cards, failing to meet monthly payments is not really a matter of choice. If you think that you might realistically struggle to regularly pay off the monthly balance on a credit building card, then you might want to look into other options like debt management plans.
Compare credit cards for people with bad credit
If you do want to take out a credit card when you have a bad credit rating that you want to improve, then use our comparison service to see what kind of products are available to you. It’s free and easy to use and searching around won’t commit you to anything so you’ve got nothing to lose and everything to gain by comparing credit building cards with Money Expert today.