Bad Credit Credit Cards
If you’ve had credit management issues in the past and your credit score is far from perfect, you may have given up on the idea of getting a credit card anytime soon. However, there are credit cards available for customers with bad credit – and what’s more – they can be helpful in actually improving your credit rating over time.
Read our guide below to learn more about bad credit credit cards.
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What is a bad credit card?
A bad credit card can also be referred to as a credit credit card, but the two are essentially the same thing – a credit card that is issued to a person with a bad credit rating or no credit rating, which – if managed properly – can help build or rebuild a credit profile.
There are generally two reasons why a person can have a bad credit score, either they don’t have a credit history (because they have never taken out a loan product such as a loan or a loan). credit card previously), or she had problems in the past with managing and paying off the credit on time.
In both of these scenarios, the individual may have difficulty accessing credit – especially low-cost credit – and so it may seem like a trap: “How can I improve my credit score if I can’t access it?” no credit? “
This is where a home equity credit card can come in. These cards are specifically created for poor credit applicants, so even if your credit history is not particularly good, you are more likely to be accepted. than if you were to apply for a regular low cost credit card.
What are the disadvantages of a credit card for bad credit?
The main disadvantages are that these types of credit cards come with:
A high APR – The lowest interest rates in the market for standard credit cards are generally between 10% and 20% of the APR for purchases. Credit building credit cards are more likely to be in the 30-40% range.
Low credit limits – Typically these cards have a low credit limit in the range of £ 1,000 to £ 1,500.
From a lender’s perspective, both of these limitations are understandable – if the applicant has a history of bad credit management, or no history at all, then they pose a greater risk to a lender than someone with bad credit. good meeting history. their repayments on time and in full.
In order to mitigate this risk, credit providers must increase the interest that a poor credit applicant has to pay and / or offer lower amounts of credit.
What Are the Benefits of a Credit Card for Bad Credit?
On the other hand, these types of credit cards have a few key advantages:
Higher acceptance rate.
Access to credit which may otherwise be difficult to obtain.
Chance to build or rebuild your credit score.
How Does a Bad Credit Card Help Me Improve My Credit Score?
Let’s be clear – even with a bad credit credit card, if you fail to pay off your repayments on time, you risk further damaging your credit score.
But if properly managed, these types of cards can help you improve your credit profile. As long as you meet all of your minimum repayments and pay on time, you will demonstrate to potential future lenders that you can be trusted to handle credit properly and that your credit score could rise as a result.
Better yet, if you can pay more than the minimum monthly repayment and pay off your balance each month, you won’t have to pay interest and you could expect your credit score to increase even more.
These types of cards can be seen as a chance for you to demonstrate to credit providers that you can be trusted to manage your finances well and that you can consider better credit deals in the future.
Will asking for a bad credit card hurt my credit rating more?
If you apply for one of these cards and are declined, it could damage your credit score.
However, most card providers offer some form of eligibility check that lets you see in advance what your chances are of being accepted for the card without damaging your credit score.
They accomplish this by performing a gentle research on your credit profile. Unlike a “hard” credit check, a soft search leaves no imprint on your credit history that can be seen by other lenders and will not hurt your credit score. Check out this article for more information on the difference between soft and hard credit checks.
Do I have to get a building credit card?
No one can tell you whether or not you should or should not apply for one of these cards – the decision ultimately has to be made by you after careful consideration. However, if you:
Have been rejected for credit elsewhere
Have a bad credit score and want to improve it
Are confident that you can at least meet the minimum repayment each month
You will not exceed your credit limit.
Then a bad credit card could help you build / rebuild your credit score and improve your financial situation in the long run, allowing you to access larger amounts of credit and lower interest rates.
How else could I improve my credit score?
In addition to using a credit card, there are other steps you can take to improve your credit profile. These include:
Make sure you are on the voters list. By registering to vote (which you can do by clicking here), you are providing proof of your address which may give potential lenders more confidence.
Make sure your credit profile details are correct and up to date. You need to make sure that your credit report does not contain any errors. Go to your credit report with the three major UK credit reference agencies Equifax, TransUnion and Experian and make sure the name and address are correct, that there are no associations that shouldn’t be it and that there are no other obvious mistakes. If you spot something that needs to be fixed, raise a dispute with the credit agency in question to get it changed. Learn more about lifting credit report disputes here.
Avoid moving too often. Lenders like to see a stable address over a period of years.
Pay your phone / broadband bills on time. Making sure those bills get paid on time is an easy way to show that you are managing your money effectively.
This is just a selection of actions you can take. For a more comprehensive guide on this topic, check out this article on Moneyhelper.org.uk.