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Credit cards for people with bad credit

It is hard to get a credit card from a bank if you have bad credit history, luckily there are alternatives, so you can get a credit card, and not only that, you can use it to rebuild your credit over time.

Compare credit cards for bad credit:

Summary
  • Ideal if you have a fair credit rating.
  • Online account management.
  • 51 day interest free period on purchases.
Credit Limit:
Up to £1,200
Representative APR: 34.9%   Apply Now
Summary
  • Some credit history required.
  • Online and mobile account management.
  • Quick response when you apply.
Credit Limit:
Up to £1,500
Representative APR: 34.9%   Apply Now
Summary
  • Some credit history required.
  • Past CCJs or defaults OK.
  • Option to increase credit limit in future.
Credit Limit:
Up to £1,500
Representative APR: 34.9%   Apply Now
Summary
  • No credit history required.
  • Ideal if you are new to credit.
  • Past CCJs or defaults welcome.
  • Online and mobile account management.
Credit Limit:
Up to £1,500
Representative APR: 35.9%   Apply Now
Summary
  • A prepaid card that can also help build your credit.
  • Guaranteed approval.
  • No credit check.
  • Card purchase fee and other fees apply.
Credit Limit:
N/A
Representative APR: Not applicable   Apply Now
Summary
  • Alternative credit scoring system.
  • Helps you get financial services even if you have to credit history at all.
  • Partly based on information you provide.
  • Ideal for migrants, expats and students.
Credit Limit:
N/A
Representative APR: Not applicable   Learn more about Aire services

Overview

When you apply for a credit card, the main factor that determines whether you get approved or not is your credit rating: If you haven’t used credit services before, missed payments in the past, had a CCJ or bankruptcy, your credit rating will be low and therefore you’re likely to get turned down should you apply at a bank or other mainstream card issuers.

But a bad credit rating doesn’t mean you can’t get a credit card as there’re cards that are designed to serve people in this category, like the ones listed above. They will function the same as a normal credit card i.e. you should be able to use it in all places that accept credit cards, the main difference is that you should expect to pay a higher interest rate.

Advantages

1. Access to credit
Lending decisions are mostly based on your credit history, i.e. your history of borrowing and paying back money to financial institutions. If you’ve missed multiple payments or defaulted on debt in the past, it will result in bad credit history, therefore difficulty getting credit from banks.

Credit scores are increasingly being used for other things besides lending, so it’s important to have a good one. In order to improve yours you need access to credit facilities, credit cards for bad credit provide that all important access for those who can’t get it through banks.

2. Repair your credit history
If there’s one positive to take from credit ratings, it’s the fact that with time and activity they change. So however bad yours is, know that you can always improve it.

The way you improve your credit is by showing financial responsibility, i.e. make your payments on time and never go over the authorised credit limit.
Use your credit card regularly and pay off more than the minimum required every month; these activities will add positive points to your credit history and over time you will gain enough positive points to overturn bad credit.

Disadvantages

1. Higher interest costs
To a card issuer, a credit rating is like a risk meter; the lower your credit rating the higher the risk of you missing payments or defaulting. To compensate for the risk, they charge a much higher interest rate than you might pay if you had good credit.

You can reduce your interest costs by keeping your outstanding balance low or paying it off every month (you only pay interest on existing balance).

2. Low credit limit
As a way of reducing risk, bad credit cards typically have very low credit limits; £300 - £1500. This will not be an issue if you just want to build your credit; the money is available for you to reuse soon after you pay it back.

If the low credit limit is an issue for you, you can apply to have it increased after you’ve had the card for some time, a year for example.

Alternatives

1. Prepaid cards
These are top-up cards whereby you deposit money onto the card before you can use it to make payments.
Prepaid cards do not allow borrowing; you can only spend what you put onto the card. On a positive note, some prepaid card issuers offer an additional credit building service, which makes them a good way to improve your credit without getting into debt.

2. Joint credit cards
If your spouse or another family member has good credit, you may ask them to add you to an existing account or to apply with you as a joint account holder.

The advantage of this is that you will pay a lower interest rate and it may improve your own credit. The downside risk is that both account holders are responsible for any debt incurred on the card, failure to pay will negatively affect the credit ratings of all account holders.

If you have trouble managing your debt or need any advice on money matters, visit the Money Advice Service.