Credit cards for bad credit

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.
• Bankruptcy.

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.

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.

Reward card

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.

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.

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 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.