Credit cards for bad credit
Compare credit cards for those who have bad credit ratings
Credit cards for bad credit
When you have a poor credit rating, it can be difficult to get accepted for a credit card - especially those that offer the most attractive terms, like low interest rates, high spending limits, cashback and rewards.
When a provider is deciding whether or not to approve you for a credit card, they’ll want to look at your borrowing history.
If you have a record of missed or late payments or County Court Judgements, for example, your application is more likely to be declined because you’re seen as risky to lend to.
But there are card lenders that specialise in helping people who’ve had credit problems in the past.
What are credit cards for bad credit?
These types of cards are specifically designed for people with a poor credit rating.
They usually come with lower credit limits and higher interest rates than standard credit cards.
If you use the card responsibly, it can help improve your credit score over time.
To achieve this, you should ensure you make all repayments on time and keep within your spending limit.
People with a poor credit rating are more likely to be approved for these types of cards, even if they’ve been rejected by mainstream providers.
But you should only go ahead with an application if you feel sure you can afford to meet the monthly payments. Otherwise, you could end up going into debt and damage your credit rating even more.
Who are credit cards for bad credit suitable for?
They’re an option for people who have a history of problems with credit such as:
- Missed or late payments.
- Defaults, when a provider, such as a mobile phone company, closes your account because you haven’t kept up with payments.
- County Court Judgements.
- A debt management plan or individual voluntary arrangement.
They’re also useful for people who have no credit history.
If you’ve never taken out any form of credit, like a loan or credit card, before, you’ll have a limited - or no - credit history. With no credit history, it can be difficult to get accepted for a lot of mainstream credit cards because lenders aren’t able to judge if you’re a safe bet to lend to. You’re more likely to get accepted for a credit card for bad credit, though. And using it well can work towards building your credit score, so you’re more likely to get accepted for more competitive deals in the future.
What are the benefits and disadvantages of credit cards for bad credit ratings?
- These types of cards have less strict eligibility criteria. They’re more likely to accept applications from people with poor - or no - credit history, who’d be rejected by mainstream lenders.
- If you manage the card well, make all monthly payments on time, and stay within your credit limit, it can help build up your credit rating.
- All credit card purchases on items over £100 (and under £30,000) are protected under section 75 of the Consumer Credit Act.
- They typically come with a low credit limit. But, with responsible use, the limit can be increased with time.
- High interest rates can end up costing you a lot if you don’t repay your balance in full every month.
- Using the card irresponsibly could see you fall into debt and damage your credit score even further.
How to choose a credit card for bad credit
The criteria for these types of credit cards will vary from lender to lender, so even if you’re declined by one, you could be accepted by another.
Credit builder card
Specifically designed for people with poor credit ratings, these cards usually come with low credit limits and high interest rates. As long as you use the card responsibly, stay within your spending limit and pay at least the minimum amount on time every month, using a credit builder card can have a positive effect on your credit score.
0% balance transfer card
This type of card lets you transfer a balance from another credit card (or cards) onto it, with no interest to pay for a fixed period of time (often 6 months or more). It can give you some breathing space to clear your debts. These types of cards are usually open to only those with a good credit rating. But there are a handful of credit cards for bad credit that offer this facility.
Prepaid credit card
Prepaid credit cards work like standard credit cards. The difference is that you need to load money onto a prepaid card before you can use it.
You don’t need to go through a hard credit check to get a prepaid credit card - which makes them a good option if you’re finding it difficult to get accepted because of a poor credit rating. However, using a prepaid card won’t improve your credit score because you’re not borrowing and repaying money when you use one.
However, there are special credit-builder prepaid cards that can help improve your credit rating. They work in just the same way as other prepaid cards, but give you the chance to add on a ‘credit-building’ option.
They do this by lending you the equivalent of one year of the card’s monthly fees. When you pay your monthly fee, you’re effectively making a repayment on a loan. So these payments will be reported to credit reference agencies. Paying on time and in full shows you’re a reliable borrower and will help boost your credit score.
Some credit cards come with rewards - such as supermarket loyalty points or cashback - every time you spend. Only a very small number of credit cards for bad credit offer rewards on spending like this.
0% purchase card
These cards come with an initial 0% period of interest on purchases. They’re usually only available to people with good credit ratings but a few credit cards for bad credit do offer this perk.
What’s the process of getting a credit card for bad credit?
When looking for a card, think about using smart search tools that make a soft search before you proceed with an official application.
A soft search will show you the cards you're likely to qualify for and - unlike a hard search and application - won’t have an impact on your credit history.
You can use smart search when looking for credit cards with Gocompare.com - just fill in your details and you'll be shown your chances of acceptance as a percentage for each card.
Am I guaranteed approval for a credit card for bad credit?
It depends on your credit score and financial situation.
Every time you apply for credit it gets marked on your credit file. This can have a negative impact on your credit score, particularly if you're refused credit. That's why using a soft search is useful. It'll give you an idea of which credit cards you're more likely to be accepted for, before you make an application.
While it won’t mean you’re guaranteed approval for a credit card for bad credit, doing a soft search before you apply will show your chances of acceptance as a percentage for each card.
Can I apply for a credit card if I have no credit history?
If you’ve never taken out any credit before, you’re likely to have a limited - or non-existent - credit score. People with no credit history are more likely to find it difficult to get accepted for a credit card.
Credit cards with the most attractive terms, like low interest rates and high spending limits, are usually reserved for people with high credit scores.
But credit cards for bad credit are aimed at people with no credit history who need to build up their credit score from nothing. While they usually come with high interest rates and low spending limits, if used responsibly they can help build up your credit score over time, so you could become eligible for better deals in the future.
Frequently asked questions
How can I improve my credit score?
There’s plenty you can do to boost your score. For example, you could:
If you’re not already on it, ensure that you’re registered on the electoral roll. This confirms your name against a fixed address for the potential lender and shows you’re in a stable position.
Keep up with repayments - and pay them on time. Missed or late payments go on your record and indicate to lenders that you may struggle to manage financially.
Aim to pay your credit card balance in full each month. And try to keep your balance at less than 30% of your credit limit. Lenders look at your ‘credit utilisation’ - the percentage you use of your credit limit. The lower the percentage you use, the more positively lenders see it.
If you’ve never taken out any form of credit before, you’ll have no credit history. So lenders can’t judge whether or not you’re a good bet to lend to. In these circumstances, you may be refused credit, even when you can comfortably afford to make repayments. Here’s where a credit builder card for bad credit can help you build up a score from scratch.
If you have a financial association - such as a joint mortgage or loan - with someone who has a bad credit history, it will affect your credit file and score too. If you no longer share finances with someone, you can let each of the Credit Reference Agencies know and ask for them to be removed from your credit report.
Make sure your name is included on any shared utility accounts. If you aren’t listed, any positive credit behaviour associated with these accounts won’t count towards your credit score.
What is considered bad credit?
You’ll be considered to have bad credit if you have a history of missed or late bill payments, or if you have CCJs or have been declared bankrupt, for example.
This kind of financial history will usually mean you have a low credit score.
If you have bad credit and a low credit score, you’ll find it more difficult to get access to the most competitive credit card deals.
What’s the difference between bad credit and no credit?
Having bad credit means you have a poor financial history recorded on your credit report. Having no credit usually means you’ve never taken out any form of credit - like a loan or credit card - before.
What credit cards build credit fast?
Credit cards for bad credit are specifically aimed at helping people with a poor credit rating build up their credit score. But it’s not a quick fix. It will take several months of responsible use where you pay your bills on time and keep well within your card limit before you see a change in your credit score.