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Are bad-credit and credit-builder cards getting better?

We take a closer look at the credit-builder credit card market and see if there are good value offers for borrowers with lower credit scores.

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The market for borrowers with poor and limited credit history has been historically led by a limited number of cards with high cost of credit.

But is the market for bad-credit and credit-builder credit cards getting better?

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What are bad-credit and credit-builder cards?

These are credit cards aimed at those with poor or limited credit histories.

They can be a good way to improve credit scores if used responsibly – in essence, not spending more than you can afford to repay each month.

Essentially, in creating a positive history of financial repayments, your credit score should improve. Which should in turn give you a better chance of being approved for other credit products in the future.

What are the table-topping offers this winter?

There are a few credit-builder cards that are worth taking a look at, we’ve picked out what we think could be a couple of the top-contenders on uSwitch below.

Vouchers and the lowest APR for a credit-builder

A six month 0% purchase period

Amazon vouchers and cashback

Are these cards getting cheaper?

Credit-builder cards haven’t been getting cheaper per se, the APRs on these cards have remained static as the more ‘high-end’ cards have seen rates creep up by percentage points here and there.

In short, credit-builder cards have become relatively more competitive, rather than dropping in real price terms.

At the time of writing, some of the market leading credit-builder cards now offer APRs starting from 24.7%, which is only slightly more than the purchase rate on some “standard” credit cards.

But, it’s the additional features (once confined to cards for those with better scores) that are making these cards a better deal, free access to credit reports; 0% interest periods on purchases, or vouchers and other freebies.

Even so, the fact remains that these cards should be used responsibly to a build a credit score (ie making sure to pay off the balance in full each month), and not for long term borrowing.

How long does it take to improve your credit score?

This obviously depends on bad it was to begin with. If it’s a case of just having no or a limited borrowing history, then you should be able to improve your score over a few months to a year, by just taking a couple of basic measures like:

  • checking you’re on the electoral register
  • getting your name on some household bills
  • a responsible history of meeting repayments

However, if you have a patchy credit history with missed repayments, County Court Judgements (CCJs) or Individual Voluntary Arrangements (IVA), it could take a few years of responsible borrowing to get your credit score back up to scratch.

Check your eligibility for credit cards

One of the reasons that credit-builder cards might be becoming more competitive is the growth of eligibility checker services.

Most comparison sites (uSwitch included) now offer you the chance to see which credit cards are likely to accept you application before you apply. So now, borrowers with bad credit histories don’t necessarily need to take a risk and can make informed desicions to get better credit cards.

Improve your chances of being accepted for credit cards

uSwitch's credit card eligibility checker won't affect your credit score and is quick, easy and free to use.

Check your eligibility

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