What are credit building credit cards?
Credit building credit cards, sometimes known as bad credit credit cards, are just like any other credit card, but these credit cards are more likely to approve your application even if you have a low credit score or have a missed payment or two in your credit history.
By using a credit building credit card, someone with a limited or poor credit history, can rebuild his or her credit score.
In creating a positive history of financial repayments on your new credit building credit card, your credit score is likely to improve and give you a better chance of being approved for other credit products in the future.
Why would someone need a credit building credit card?
A low or bad credit score can be the result of a number of factors, some of which can be quite surprising, and others, which are not a surprise at all:
- Not having a history of credit. It may seem counter intuitive, but if you’ve never had a credit card, loan, or never even paid off any utility bills at home, your credit score is likely to be quite low. This is because lenders want to see a history of repayments to know they can trust you with paying back their money.
- Not paying your bills on time. Unsurprisingly, if you miss a payment or fail to pay your bills on time, be it a credit card or even a mobile phone bill, it will show up on your credit report, which all lenders can see.
- Not having your name on the electoral register. Signing up for the electoral register in your area is a signal to lenders that you are less likely to commit fraud, as your address and your name are linked together.
- CCJs or bankruptcy. County Court Judgments (CCJs) and/or being made bankrupt in the past will significantly reduce your chances of being able to obtain credit again.
A credit building credit card can help obtain credit when it would normally seem less likely. But before you even compare credit building credit cards, it’s important to look at what you can do to begin improving your credit score.
How to improve your credit rating
It’s worth looking at your finances and assessing how much you need to borrow to get by, and more importantly, how much you can afford to pay back each month.
The more you can pay back each month, the better. Ideally, if you can pay back the full amount each month on your credit card then you can avoid paying the interest on your lending. This will also help improve your credit score.
If you are unable to meet your repayments a credit card can be a risky proposition, but if you need to borrow you may be better off with a low APR credit card.
If you are on the electoral register then the address you’re registered to vote at will match up with your credit card billing address, and this will help your chances of being approved for a credit card application.
If you haven’t got any history of repayments, then it might be worth putting your name on some utility bills at home and paying them in your name. This will show up on your credit report and demonstrate to lenders that you have a history of repayments.
Credit building credit cards – the disadvantages
Credit card providers who offer credit building credit cards are aware that their target audience is people who have no or limited history of credit or even a poor credit history.
This means that the credit card provider will charge a higher rate of interest to mitigate the perceived risk of lending to someone with a limited or poor credit history.
Credit building credit cards will have interest rates of around 30% to 50%, sometimes higher, which in comparison with many other credit cards can be much higher.
Credit limits on credit building credit cards are also usually much lower than on most other credit cards.
This can be a positive as it means you have to control your spending much more to avoid going over your limit, and thus, should make it more manageable to pay off your balance each month.
Credit building credit cards – improving your finances
Once you have a credit building credit card, your priority should be to maintain repayments – ideally by setting up a Direct Debit – and to ensure you stick to your limit.
If you can keep it up, you’ll be in a position to negotiate a better deal for your self with your credit card provider.
Many credit building credit cards already have features that allow you to increase your credit limit or reduce your APR on the condition that you make repayments on time.
The incentive of improving your credit score should also be enough, as in the future you will have more chance of getting a better mobile phone contract, energy deal, credit card, loan, current account or mortgage.
Your credit report and score affects many consumers choices, so if you do get a credit building credit card, it’s important to use it effectively.
Compare credit building credit cards with uSwitch
You can compare credit cards for people with bad credit and credit building credit cards with uSwitch’s comparison tables.
What are top deals?
One way to sort our table is by 'top deals', whereby we highlight cards that are market leaders for particular features or offer an exclusive deal. For example, of all the credit cards charging no transfer fee, the one with the best overall offering might be a top deal called 'No transfer fee'.
We do this to highlight that it is the best in its class on uSwitch. We check these deals weekly to ensure they really are the best on uSwitch in that area, so you can rest assured that our top deals are just that - the top deals on uSwitch.
What does 'popularity' mean?
Cards on this table are initially ranked by popularity, however you can alter the filters to rank by APR or minimum or maximum credit limit. Popularity on this table is based on how many people via uSwitch take out the cards from the lenders listed.
Does uSwitch compare all the credit cards on the market?
We compare credit over 100 credit cards from all of the major banks and credit card providers.
However, we do not compare all the credit cards that are available in the UK.
This is because some credit card providers have offers that are only available exclusively through their own website or branch, or through other comparison websites - in the same way some credit cards are exclusively available through uSwitch.
There are also many credit cards that are only available to people in member organisations and clubs.
What does it mean if a card is listed as an “advertisement” or “promotion”?
We sometimes receive payment from card providers to display their cards in prominent locations.
These are adverts and are designed to be distinct and separate from the other cards on our comparison tables. We hope this makes it clear which cards are top-of-table deals and which cards are paid for promotions.