You’re probably here because you’re having trouble getting accepted for a credit card, or someone you know is. Well, chin up, we’re here to help you find out why that might be and what you can do about it.
Getting credit can be a bit tricky. When you apply for a loan or a credit card, the provider will look at two things to work out what kind of a customer you’ll be. These are your credit score and your credit history.
When you fill in an application form for a credit card you’ll be asked lots of questions. Each of your answers is given points and the lender adds these together to give a score. The higher your score, the more creditworthy the lender considers you. Creditors set a threshold level for credit scoring. If your score is below the threshold they might decide not to lend to you, or, lend to you with higher charges.
As well as your credit score, the lender will look at your credit history, which they do by using a credit reference agency like Experian, Equifax and CallCredit. These agencies keep information about people including past addresses from the electoral roll and public records like court judgments and bankruptcies. They can also see how you have managed your bank account and other borrowing and whether you have made payments on time.*
If you have had trouble paying off debt in the past, these checks will pick it up – and the lenders might not be so keen to have you as a customer. Understandably, they want customers who will pay back their debts.
If a lender refuses you credit after checking your credit reference file, they have to tell you why credit has been refused and tell you which credit reference agency they used.
Check your file
If you’ve been rejected a few times it’s worth trying to find out why by having a look at your credit file. At least then you’ll know what you’re dealing with.
But, if you haven’t had any loans or overdrafts, you might also find that you struggle to get credit. This is just because the lenders can’t tell enough about you to decide whether you’ll be a good customer. So they decide not to take the risk and decline you.
Credit building cards
In either of those situations, you might be able to build your credit score up. A credit building credit card could help you do just that.
These cards typically give people with a low credit score and newcomers to the credit card market a better chance of being accepted for a credit card. The amount of credit offered will usually be less than with a standard card, and with some the interest rates can be quite high, so it’s important to use them carefully.
Choosing a credit building card
So how can you find the best credit building credit cards?
We can help you decide which credit cards will suit you. Use our credit card comparison page and it will show you a list of credit building cards. They’re listed in order of Annual Percentage Rate (APR) which tells you how much the card will cost you over a year, in both interest and charges. Each will have different features, so while we can’t tell you which ones are the best credit building credit cards, we can help you decide.
Use them carefully
While the allowance on credit building credit cards is often pretty low – say £1,200 – this can increase once you’ve shown that you’re effectively managing your credit.
To do that, always stay within your credit limit and don’t miss payments. Be aware that if you don’t pay the balance off every month you will start to pay interest on the balance.
Other credit options
Once you’ve successfully built up your credit history you can start comparing a broader range of credit cards. Depending on your needs you can choose from various zero percent credit cards, or look at cards that offer rewards and cashback. Some zero rate credit cards will offer both free balance transfers and interest-free purchases.
Again we can help you narrow down the options and help you decide which credit card is for you. Do remember though that the safest way to avoid debt is not to use credit cards, or by paying them off every month.
Good luck with your credit building!