Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Credit cards for people with bad credit
If you’ve got a poor or limited credit history, then you will probably have trouble taking out a conventional credit card. However by taking out a specialised credit building card, you could watch your credit rating improve as you spend.
By issuing cards with low spending limits and high APRs, credit card companies can reduce the risk taken by lending to less viable candidates and improve the viability of those candidates in one fell swoop.
In This Guide:
- Why do I have a bad credit rating?
- How do credit building cards work?
- Who should take out credit building credit cards?
- Compare credit cards for people with bad credit
Why do I have a bad credit rating?
Your credit report is essentially your financial footprint, used to build up a profile of your creditworthiness, that is, your viability as a candidate for borrowing.
There are various things that will affect your credit rating, for better or for worse. One of the biggest things that can make your credit score worse is being late on any payments, whether for bills or for loans.
Taking out any loans and paying them back in a timely fashion will make your credit rating better than it would be if you hadn’t taken out any credit to begin with. This is where credit building credit cards come in.
How do credit building cards work?
Credit builder cards allow you to steadily improve your credit rating by letting you borrow small amounts at a time, paying it back each month and thereby proving that you can handle your credit.
These kinds of cards will come with a low spending limit, often around £500, with the idea being that you are only allowed to spend as much as you can easily afford to pay back. So by using one of these bad credit cards, you can demonstrate your creditworthiness over time by spending and paying off your balance in full each month.
Who should take out credit building credit cards?
Fairly obviously, credit building cards are designed for those with bad credit ratings, but they can also be a good idea for people who’ve never used credit cards before.
Given the low limit, a credit building card is a good place to start when you come to taking out your first credit card. It allows you all of the benefits of a credit card, while imposing a limit low enough that you can be certain that you’ll use it responsibly.
If you take out one of these cards when you don’t actually need the credit and just use them to buy things you’d normally buy throughout the month, then you’ll gain all of the credit building benefits at no extra expense. If you do it this way, you don’t really have anything to lose; you just spend as you would normally and watch your credit score get gradually better and better.
Compare credit cards for people with bad credit
Compare credit building cards online with Money Expert to see what kind of limits and representative APRs you could be getting.
We’ll show you the best cards available given your requirements so that you can start spending and repairing your credit rating right away.