What is a credit rating?
Your credit rating is a score lenders use to judge how risky it would be to lend to you, based on your borrowing and repayment history. It's worked out by credit reference agencies from things like how reliably you've paid off past credit, how much of your available credit you're using, and how long you've had credit accounts open. Lenders then use this, alongside their own criteria, to decide whether to accept your application and on what terms.
What is a bad credit rating?
There's no single number that applies everywhere, since different credit reference agencies use different scales. As a general guide, Experian classes a score below 640 (on its 0–1250 scale) as low, meaning lenders are more likely to see you as higher risk.
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. High credit utilisation, County Court Judgments (CCJs), and several credit applications in a short space of time can also count against you.
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.
What credit cards can I get with bad credit?
With a poor or limited credit history, you're unlikely to be accepted for a standard credit card, since lenders reserve those for applicants they see as lower risk. Instead, you're more likely to be accepted for a credit building card, which is designed specifically for people in this position, has a lower spending limit, and typically comes with a higher APR to reflect the risk to the lender.
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?
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.
What to avoid with a credit building card
Maxing out the card. Using close to your full limit each month, even if you clear it, can work against you rather than for you.
Missing a payment. A single missed or late payment can undo months of progress, since payment history carries the most weight in most credit scoring models.
Applying for several cards in a short space of time. Multiple applications close together can look like financial difficulty to a lender, even if each individual application is reasonable.
Using it as a way to borrow more than you can afford. If you're struggling with existing debt rather than building a limited credit history, a credit building card is unlikely to be the right tool.
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 cards that may suit your requirements given your requirements so that you can start spending and repairing your credit rating right away.