Rebuilding your credit score with bad credit cards

The mere mention of bad credit is enough to send shivers down the spine of many of us. If you have a bad credit score, you'll understand the limitations that poor credit can place on you regarding the rates and types of products you're eligible for (if any). So, it might be that thinking about bad credit is not high on your list of priorities. Nevertheless, proactively dealing with bad credit, (rather than simply sticking your head in the sand) is often the best way to minimise its negative effects.

Credit building waltzer

Although it may seem counterintuitive, one of best ways for people to address a bad credit rating is with more credit. By using a credit line in a way that demonstrates a mature approach to credit, you can show prospective lenders that you are unlikely to default on any money they might lend you. This makes you a more attractive customer to them.

But how can you get credit if you have bad credit? High interest short-term/payday loans are one option, but they often make a bad situation worse. Another option is credit cards for bad credit.


What are bad credit credit cards?

Credit cards for bad credit are specifically designed for people with a bad credit history. As such, the eligibility criteria for these cards is less stringent, and they can accept customers who present a higher level of risk.

There is, understandably, a trade-off, because bad credit credit card interest rates are much higher than those on products available to people with good credit. However, they do offer a platform for rebuilding credit that would otherwise be unavailable. As such, they are one of the best ways to start rebuilding your credit rating.


Improving your credit score

Of course getting a credit card for bad credit is only the first step in rebuilding your credit score. Simply possessing a card will not in and of itself improve your credit. The key to improving your credit score is to use your card to showcase your (good) credit management skills.

In a nutshell, this means using your credit card and successfully paying the minimum payment every month by the specified due date. That said, given the high interest rates on these products, it is wiser to clear the balance in full every month. One way to do this is by only purchasing items on credit when you know you have money available to repay your card issuer immediately. This means you'll never spend money on credit that you don't have.

If you have a reliable source of income, you could consider spending before you have money available, but this can be unwise when rebuilding your credit, as you must make the required payments like clockwork (regardless of whether someone fails to pay you money you expect). At the very least you should have the money available to make your minimum payment.

Use our minimum payment calculator if you don't know what your minimum monthly payment will be.

Your credit card issuer will report your behaviour to the UK credit reference agencies regardless of how you manage your card, but assuming you have followed the approach detailed above, you should see your credit rating quickly and steadily increase.


Credit Building Pitfalls

Using the method described above has helped many thousands of people get their credit score back on track, but it is not without potential hazards and pitfalls.

Failure to make your card issuers required minimum payments on time will result in your credit rating suffering still further, making it even harder to obtain reasonable borrowing in the future.


Comparing bad credit credit cards

There are numerous UK card issuers offering credit cards for bad credit. Some of these issuers are well-established household names, while others are specialist, and niche bad credit brands; so how do you select the best credit rebuilding card to apply for?

Credit card comparison tables are perhaps the quickest and easiest way for applicants to assess products based on specific attributes and features. Tables comparing bad credit tend to sort products based on the advertised Representative APR, from lowest to highest. Of course, this is a major consideration if you are expecting to pay interest. However, if you know that you are in a position to pay your balance in full every month (and therefore never incur any interest), you might want to look for other features. Some bad credit credit cards offer cash-back, free access to credit your reports, or 0% interest on purchases, which can all be very useful if you're in a position to take advantage of them.

Bad credit comparison tables also specify whether a particular card uses a soft-search eligibility check, before a full application is made. Credit card eligibility checkers can be especially useful for people with very poor credit, as they offer an indication of the likelihood of being accepted, without a full credit report search being completed. Having too many full credit report searches is often regarded by prospective lenders as a signal that you are in financial distress (and therefore more likely to default on borrowed money). Using a soft-search tool ensures full searches are only undertaken if an applicant stands a good chance of making a successful full application. This prevents those who are likely to be rejected from harming their credit score further.

 


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