Best credit building cards – even if you’ve had a CCJ or been declared bankrupt
A BAD credit score can stop you getting a mortgage, credit card, mobile phone and car finance.
And if you are offered a loan or credit, it’s likely you’ll be charged a much higher rate of interest than someone with a good score.
It can feel like a spiral that traps you in ever more expensive debt that’s harder to repay.
It’s easy to damage your score – an unpaid parking fine or late energy bill payment can send it plummeting.
But there are simple ways to help get your financial credibility back up.
One way is to take out a credit builder credit card.
These are designed specifically to help people who have bad credit improve their score.
What is a credit builder card?
A credit builder card is a credit card – with some differences.
It’s designed for people who don’t have a credit record – perhaps because they’ve never borrowed before – and people who’ve had a difficult time with money and have bad credit.
Some credit cards let you borrow more than £10,000 but generally credit builder cards will give you a much lower credit limit.
You’re also likely to be charged a higher rate of interest than is available on a typical best buy credit card.
This is because a poor credit record indicates that you might find it harder to keep up with repayments.
The good news is that if you pay off the balance at the end of each month, your credit score should go up in around six months.
That will mean you are more likely to be approved for a new credit card with a lower interest rate in future.
It’s also worth remembering that paying off the balance in full each month means you won’t pay any interest, so you don’t need to get into debt to start building your record again.
Ex-partners and bad credit
Anyone you have a formal financial relationship with can ruin your credit score even if you’re sensible with money.
If you’ve had a joint bank account or mortgage and an ex-partner, for example, runs up debts then your credit score will suffer.
Many people who have split from a partner find themselves in this situation through no fault of their own.
A credit builder card can be a lifeline for anyone stuck in the bad credit loop.
Who offers credit builder cards?
Not all of the big credit card companies have a credit builder card so it’s worth having a look at a comparison site to get a feel for what’s on offer.
The main providers are MBNA, Aqua, Tandem, Ocean, Marbles and Vanquis.
There are also options from some of the bigger banks.
Each card offers something slightly different so consider what you want from yours.
How to choose a credit builder card
Alex Hasty, finance expert at Compare the Market, says the most important things to focus on when you’re comparing deals are the interest rate – the annual percentage rate or APR – and credit limits.
Here are some of the best credit builder cards on offer now.
Whether you’re eligible and the rate you can get will depend on your circumstance though.
Using an eligibility calculator like the one on Money Saving Expert or price comparison sites can also give you an indication of what you can get before applying – and will avoid a hard credit check which could damage your score further.
Barclays Forward Credit Card
APR: 33.9%
Credit limit: £50 – £1,200
Fees: £0
Barclaycard will offer you a credit limit that’s tailored to you personally and has one of the lowest minimum balances.
That’s useful because they won’t let you overborrow and potentially get into more troublesome debt.
If you keep up with repayments for the whole of the first year, your interest rate will drop 3% and in the second year it can come down another 2%.
That will bring it more into line with mainstream credit cards at 28.9% APR.
With this card, you’ll also get access to Barclaycard Entertainment giving you discounts on more than 3,500 gigs, comedy nights and family days out.
Tesco Bank Foundation Credit Card
APR: 29.9%
Credit limit: £250 – £1,500
Fees: £0
Tesco‘s credit builder card has one of the lowest APRs for those with bad credit.
They’ll consider giving you a card even if you’ve had a County Court Judgment (CCJ) in the past – so long as it’s more than 18 months old.
You can collect Tesco Clubcard points when you spend on the card – you get five points for every £4 spent in Tesco and one point for every £8 spent anywhere else.
You’ll also get three years access to your full credit report and score for free.
Capital One Classic
APR: 34.9%
Credit limit: £200 – £1,500
Fees: £0
While this card doesn’t come with any specific perks and the APR is one of the highest, it does have the advantage of allowing you to increase your credit limit twice a year if you keep up with payments.
You can apply even if you’ve had a CCJ or been declared bankrupt, so long as it was more than 12 months ago.
Asda Money
APR: 34.9%
Credit limit: £250 – £5,000
Fees: £0
Another card with a high APR but Asda’s credit builder card offers a higher credit limit.
It also comes with rewards.
For every £100 spent in Asda, you’ll get £1 in Asda pounds through the Asda app. You’ll get 33p on spending everywhere else.
How to use a credit builder card
You can use a credit builder card to pay for things just like you would with any other credit card.
But there are some key things to remember, warns Alex Hasty, finance expert at Compare the Market.
1. Keep up with payments
Always try to pay back what you spend each month in in full, to avoid high interest charges.
If you really can’t pay the full amount, be sure to make at least the minimum repayment on time.
2. Don’t use more than 25% of your limit
Try to stay under 25% of your credit limit.
By spending small amounts and paying off the balance in full each month, you’ll prove to lenders that you can manage debt responsibly and steadily build up your credit score.
3. Avoid withdrawals
Never make cash withdrawals on your credit card as you’ll face expensive charges.
4. Avoid over-spending
‘It’s best to think of your credit builder card primarily as a way to boost your credit score, rather than a green light to spend money you don’t have.
Other ways to repair bad credit
There are other ways to improve your credit score. Alex Hasty reveals his top tips.
Beware of your partner’s credit history
If you’re setting up home with someone, applying for a joint bank account, mortgage or loan financially links you together. If your partner has a poor credit history, it could affect your own chances of getting credit in the future.
Pay insurance premiums upfront if possible
If you choose to pay for insurance products in monthly instalments, a hard search will usually be done beforehand. If possible, pay upfront to avoid any hard searches being marked on your credit file.
Make sure your name is on some of the bills
If you share a house, make sure your name is on one or more of the utility bills. Utility bills in your name can help boost your credit score.
And the basics
- Register to vote
- Make sure your address is up to date on your credit report and with the DVLA
- Check your accounts and report any suspicious transactions to Action Fraud, your bank and the credit reference agencies Equifax, Transunion and Experian
- Challenge any information on your credit report which is incorrect