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Credit cards to improve your credit rating

If you have a bad credit rating, you will have a hard time getting a loan, but there are some credit cards available.

Having bad credit means many banks may reject your application while others will offer you terms and conditions that will make your hair stand on end, including an interest rate that’ll keep you in debt for the rest of your life.

Credit-builder credit cards

Credit-builder credit cards are designed to help you improve your credit rating with regular repayments.

Build your credit rating

The good news, though, is that you can improve your credit rating, and there are specialised credit cards available on the market to help you do it.

You can fix your credit rating by getting one of these credit cards and managing it properly, meaning you never exceed the credit limit, and you make all payments on time.

However, many of these cards charge a hefty interest rate, so make sure you never spend more than you can afford to pay off every month to avoid high interest costs.

Bad Credit Credit Cards

A number of providers offer credit cards for bad credit. While they generally feature very expensive interest rates, some do offer nice introductory deals that will help you clean up your financial situation.

For example, rates vary between 35 and 40%, but some feature a 0% APR on purchases for the first three months, cashback options, or an annual reduction of the interest rate for every year you don’t have any late payments.

The key to using such a card successfully is to see it as a tool to clean up your credit rating, and not as a new source of debt. This means you need to keep your head in the game and spend small amounts you can repay in full every month.
Things that could affect your credit rating
After six to twelve months, you would have built up a credit profile that will show you’ve overcome your previous financial difficulties, making you a more attractive prospect to lenders.

Make sure to read the fine print before applying for one of these credit cards, though. Some will reject you if you have County Court Judgements or defaults in the past year, while others will accept your application regardless of how poor your credit rating is.

This is important because being turned down for a credit card will go down in your credit file, and make it even harder to get another card.

Prepaid Cards

Some prepaid cards can help you improve your credit rating. A prepaid card only lets you spend your own money, because you have to load it up with cash to use it.

However, almost anyone can get one of these cards because banks don’t do credit checks.

Most prepaid card issuers charge a fee to open the card, and some also charge a replacement fee.

Some cards also come with a monthly fee, which are cards you’d avoid in normal circumstances because of how expensive they are. However, when you’re trying to rebuild your credit rating, you actually have to do the opposite.

With a prepaid card that charges a monthly fee, the amount you have to pay every month actually counts as a loan. So, if the card has a £5 monthly fee, it would be like taking out a loan of £60 per year.

If you pay this fee faithfully every month, the card issuer will send the information along to the credit reference agency.

After one year, it will be marked as a loan agreement you have paid in full, making you more attractive prospect to lenders.

There are quite a few specialised credit cards that can help you improve your credit rating. However, for this approach to work, you need to make sure you make payments on time.

You also want to avoid going into debt on these cards due to high interest costs. It might be difficult for a while, but this process will help you qualify for better loan deals in the future, so it’s worth it.

Company Details Fee 

icount
Fee includes bank account
No credit checks
£4.95 for the card
£9.95 per month
Apply

Pockit
Bank online or with the App
No credit checks
Have wages or benefits paid in (proof required)
One off £0.99 fee for the card
ATM withdrawals cost £0.99
Paying in money as cash at a paypoint costs £0.99
Apply

Secured Credit Cards

Secured credit cards are relatively rare in the UK, but they do exist. To get one of these cards, you have to make a deposit in cash.

The amount you have to deposit varies from lender to lender, with some requiring you to deposit a pound for every pound they lend you. So, if you want a £500 credit limit, you’re going to have to make a £500 deposit.

While this might not be the best type of card for new debt, it’s a good way to improve your credit rating because practically anyone can get one of these cards.

There’s no risk to the lender because if you default, they can just keep the deposit, and they’re covered.

So, ideally, you should apply for a secured credit card with a relatively small limit, which you can for small payments. Pay it off in full every month to avoid interest charges, and you’ll be well on your way to improving your credit limit.

Note that many high-street banks don’t advertise secured credit cards, but if you call them up and ask, you’ll often find that they do have this option.

Read more…

Credit-builder credit cards

Credit-builder credit cards are designed to help you improve your credit rating with regular repayments.

Build your credit rating