Credit building cards
If you’re worried about a low credit score, then a credit building card could help you out. Learn how, if used in the right way, this type of plastic can work for you while giving peace of mind.
Frequently asked questions
What is a credit building credit card?
A credit building credit card, sometimes known as a bad-credit card, is a type of credit card available to people who might not get accepted for standard cards. These cards can help you get credit and, as long as you meet the repayments each month, help to prove that you can manage money in a responsible way. If your credit score is low, then a credit building card can be a good way of building it up.
How do credit building cards work?
As with all credit cards, a credit building card will have a maximum spend limit. However, the limit is typically lower than most other credit cards – from around £100 to £1,200. It’s also very important you understand the APR (annual percentage rate). A credit card’s APR shows you how much interest you would be charged, over the course of a year, for borrowing on credit if you don’t pay the outstanding balance back in full each month.
Credit building cards often come with a higher rate of interest, so it’ll cost you more money (in terms of interest) if you don’t pay it off each month. This reflects the cost of the greater risk the provider is taking on by lending you money. Therefore, as with any credit card, it’s really important to pay off what you owe on the card in full each month. Depending on the terms and conditions set out in your card agreement, your limit could be increased as you prove you can spend more responsibly, but this depends on many factors – including the terms you agreed to when you applied for the credit card.
What are the pros and cons of a credit building card?
As they tend to have a low spending limit, a credit building card can be a good way of starting your credit history as you may not be able rack up thousands of pounds worth of debt over a short period of time. However you might view a low spending limit as a drawback. As previously mentioned, this type of card tends to carry a higher rate of interest so you should consider it in the context of other cards on the market. And don’t forget there’s always a personal risk involved in taking out any kind of credit.
What’s a credit score and why is it so important?
A credit score is a tool typically used by a lender to work out whether you qualify for a particular credit card, loan or mortgage. A higher score means you're more likely to be accepted for credit. A lender will also consider your credit report (or history), detailing all the credit you’ve had or applied for in the past. Read about some of the steps you can take to improve your credit rating.
Why might I be refused credit?
There are many reasons you could be refused credit. It could be that you’ve no history of credit, have never borrowed or even had an overdraft. If that’s the case, then a lender will have a limited idea of whether or not you’d be a good risk and will be able pay back what you owe. Another factor could be that your employment status isn’t strong enough to get the credit card you’d like.
Credit checks also highlight any problems you may have had in the past with paying back debt. To a potential lender, this might serve as a red flag and they may refuse to accept your application. Checks will also show whether you have any County Court Judgements (CCJs) against you, have ever been declared bankrupt or if you’ve committed any fraudulent offences. Or if you’ve been a victim of fraud in the past, this could have made getting credit difficult for you. If that’s the case then you might compare with providers who offer dedicated fraud monitoring for added peace of mind. The best way to do this is to read thoroughly about the providers on our site before committing to a new card.
Where can I check my credit report?
There are three main agencies in the UK: Experian, Equifax and Callcredit. These organisations compile all of the information about how you manage your money (assuming you’re over 18). However, it’s worth noting that not all of them will hold exactly the same information about you.
If you’ve been refused credit, you can ask why and find out which Credit Reference Agency (CRA) was used. You can also check your credit report to make sure it’s correct. You might find there’s a genuine error on your report, or a refusal could be down to something simple like your address being wrong.
What else should I look for when choosing a credit building card?
When comparing providers, you might want to ask yourself:
- Does the credit lender run a ‘soft check’ before I apply? A soft check is when a person or company checks your credit report as a background check. Each time you apply for credit it’ll show up in your credit history, but a soft check won't affect your credit in any way but will help you know if you are likely to be accepted for a card or not without fully applying.
- Can I manage my credit card account online or through an app? Some providers will notify you via a text or other alert when a payment needs to be made or a new statement can be seen – both of which can help you to keep on top of your finances.
Where can I compare credit building cards?
We’ve teamed up with Runpath Regulated Services Limited to show the key features of each of the credit-building cards you can compare with us, helping you to choose the card that’s right for you.