Getting credit cards with bad credit history
A poor or limited credit history can make it difficult to get credit, but there are products in the market designed specifically for people who have trouble getting loans and other credit products. If you have been rejected for credit, or have checked your credit report and believe that you might be unlikely to get credit, it might be wise to investigate what options remain.
Even if you have had trouble paying off loans in the past, it does not mean credit can’t be a useful part of your financial life. As long as it is used responsibly, and you have resolved the issues that caused your previous financial problems. Here we look at the credit cards that are available for people with a poor credit history, and what factors to consider when getting one.
Credit cards for bad credit
Credit cards are one of the most flexible forms of credit you can find, once a credit limit has been agreed, cardholders have ongoing access to credit which can be used or paid down on a continuous basis. Although this is a very convenient form of credit, the instant access to debt can cause problems for some people, particularly if they become dependent on credit cards to fund everyday purchases.
There are credit cards on the market specifically designed for people with poor credit history, they are sometimes called ‘credit builder’ cards as they help people build a history of reliable borrowing. These cards can come with very specific stipulations, such as excluding borrowers with more than one County Court Judgment (CCJ).
Finding a credit card that suits your circumstances can also help you avoid having your application rejected. Any application for a credit card will be recorded on your credit report and if you make several applications in a short space of time, it can indicate to lenders that you may be struggling financially and therefore reduce the chances of being accepted. Finding a card with a greater chance of approval will help avoid this.
What do different credit cards for bad credit offer?
The main difference between cards will be the credit limit and the Annual Percentage Rate (APR). The credit limit is how much total debt you can have at one time, and with credit cards for bad credit this will usually be significantly lower than your average credit card. APR is the rate of interest you will effectively pay back on any debts run up on the card.
If you make full repayments each month, then you will not incur any interest, which is important because cards designed for people with poor credit history will have a much higher APR than most cards. This is because lenders are likely to see someone with a history of missed payments or defaults as a higher risk, and will increase charges accordingly. Repaying your balance in full each month will also show lenders that you are able to manage your finances responsibly. This will improve your chances of being accepted for credit in the future.
These types of cards are less likely to come with attractive introductory offers like 0% interest or perks like vouchers or tickets to events. However, some do, so it’s still worth keeping an eye out for offers on balance transfers which might help move existing debt to a lower rate of interest.
How to help improve your credit history
Getting one of the cards discussed above can help when trying to rebuild your credit history. Borrowing small amounts and paying them back on time demonstrates to lenders that you can use credit responsibly. Lenders are interested in your most recent activity, so credit history from years ago will become less relevant over time.
As well as making repayments you should also ensure that all your personal details (e.g. name and address) are accurate on your credit report, and that you are registered on the electoral roll, so lenders can verify your identity.
Don’t apply for too many different credit products in a short space of time, as every application will show up on your credit report. Rebuilding your credit history takes time, particularly if you have recent defaults or CCJs.
If you’re struggling with your finances, there are lots of free advice services available to help you get back on track. For example, the National Debtline has a free phoneline and a web chat service. You should address issues of debt before trying to obtain any further credit.
If you are interested in checking details of your credit history, you can get online access to your credit report with your Equifax Credit Report & Score, which is free for 30 days and £7.95 a month thereafter.
- Guide to student overdrafts
- Guide to student credit cards
- What is a credit blacklist?
- What are 0% interest credit cards?
- Moving to the UK and your credit score
- Who can see your credit report?
- Should you lease or buy your next car?
- Student loan repayments
- Balance transfers explained
- Credit cards and minimum repayments
- Financial association explained
- Getting a mobile phone contract with bad credit
- What is a credit union?
- Why have I been refused a credit card?
- Why do people use vehicle refinancing?
- What does my credit score say about me?
- What to do if you've missed payments
- New interest rates for savers and borrowers
- How to maintain a good credit score
- Can you achieve the highest credit score?
- Can you pay off loans early or late – or take a payment holiday?
- Infographic: Back to basics – how do credit reports and scores work?
- What happens to credit history when moving abroad
- Credit checks for renting
- Understanding credit score ranges
- Divorce and your credit score
- How credit cards work – how they may affect your credit rating
- Students and credit reports
- Credit agreements – the basics
- Different types of credit card
- Death and credit reports
- Newlyweds, financial planning and credit
- What is a guarantor and how do they work?
- Explaining compound interest
- How Credit Scores Affect Car Finance
- How can I improve my credit score?
- Getting credit with no credit history
- Soft credit searches explained
- What to consider when applying for credit cards
- What is a credit rating?
- What types of credit can you get?
- Staying on the electoral register when moving
- The Electoral Register and How It Influences Credit Scores
- 7 types of credit provider
- Credit: Why do People Use it?
- Credit Myths - The truth about Credit
- Interest Rate Types
- Credit Hygiene
- Credit Score: What are the factors?
- Your Credit Limits: Do’s & Don’ts
- Secured Vs Unsecured Loans
- Joint Liability - Everything You Need to Know