Although credit building cards are a good option for those who a poor credit history or with no history at all, they do come at a price. Because lenders are taking a risk by giving access to credit to an individual who may potentially not be able to repay the necessary repayments, they in turn charge a high interest rate to counter balance this. There are many different providers and each will offer a different interest rate for customers, so be sure to shop around for the best possible interest rate that you think you will be able be accepted for, given your credit score.
Credit building credit cards
Although credit building cards are designed with those who have a poor credit rating in mind, not all applicants will be accepted. There are many factors that dictate whether or not you will be able to get a credit building credit card, like your income and the current state of your finances. If you are turned down however, be aware that there are many providers and they may be one who will be willing to give you accept your application; but at the same time also be aware that getting turned down from some providers can have a negative effect on your credit rating, making it more difficult for you to borrow in the future.
Gives you the opportunity to build your credit score, which is ideal for those who have either had problems repaying debt in the past who those who have not yet had the chance to demonstrate that they are reliable and fully capable of paying back their debts
Some cards will come with the opportunity to achieve rewards if you are able to keep up with your repayments as an added incentive.
Because they are designed for those who may be less reliable with their spending, credit building credit cards will have a lower spending limit, meaning that they cannot be used to purchase very expensive items.
There is a high interest rate that is in line with the level of risk that lenders are taking by giving credit to individuals in a high risk category. However after consistently paying off the credit you owe, you will likely be able to move onto better deals.
Make sure that you are on the electoral register, as lenders often use this is a way of verifying your home address and any past addresses you may have had. You can do this by contacting your local council.
Another useful tip is to order your credit report, since it is what lenders will be using to assess your eligibility you can check to make sure that everything about is up to date and correct. In the event that you do notice there has been a mistake regarding your credit history, all you need to do is contact the credit reference agency and explain the mistake to them and the situation will get cleared up. You can also add a statement to your record in order to explain to potential lenders why it is that your credit rating is not as good as it could be in order to give them a better understanding of your situation.
If you have any remaining outstanding debts, then it's a good idea to pay them as soon as possible. Any credit cards or county court judgements which you pay off will show up on your credit history and has a positive influence on potential lenders decisions.
Last reviewed: 1 September 2023
Next review: 1 October 2023