What credit cards are available for bad credit scores?

What to consider before you apply for a credit card for bad credit

Often the cards targeted at people with poor credit have very high interest rates – 30-70% APR – yet are marketed as a way to improve your credit score and help you get your finances on track. While it’s true that such cards can be cheaper than high cost credit like payday loans the debt can prove to be very expensive and difficult to pay back.

If you feel you need to take out a credit card like this because you can’t make ends meet without access to credit, or if you’re considering taking one out so that you can keep up repayments on other debts, be careful. These may be signs that you need debt advice rather than a potentially expensive credit card that could increase your debt.

What are credit cards for bad credit?

Credit cards for bad credit, sometimes called ‘credit-builder’ credit cards, tend to have lower spending limits and higher interest rates than normal credit cards.

You might assume that the fact a firm is willing to offer you a credit card means that the risk is manageable for you. However, many people who have had a ‘credit builder’ credit card feel it actually made their financial situation worse rather than better.

If you need help in managing your debts, or want some support in knowing how best to handle credit, contact us now for free, impartial advice. We’ll help you explore various options for managing your finances.

Should I use a credit card to improve my credit score?

If you’re looking to improve your credit score, there are other ways you can improve it without applying for a ‘credit-builder’ credit card. These ways may reduce the time it takes before you can apply successfully for a credit card with a lower rate of interest or avoid the need to apply for a credit product all together.

• Pay back any credit you’ve borrowed
• Register on the electoral roll
• Check your credit report to make sure it’s correct
• Make sure your credit file isn’t linked to somebody with a poor credit score

After thinking about it, if you do decide to apply for a credit card with a poor credit score, make sure you reduce the risk of falling into unmanageable debt.

Escaping the credit card rejection spiral

Credit cards for bad credit are available to a greater number of people. However, it’s still possible that you won’t be accepted, depending on your credit history. As with any credit card, a failed application will further reduce your credit rating. This problem is known as the ‘rejection spiral’.

There are two things you need to do to avoid this spiral:

1. Don’t apply for too many credit cards in a short space of time. If you receive too many rejections in a short period, this could damage your credit rating
2. If you want to apply for a credit card, first carry out a ‘soft search’ online. There are several websites offering an eligibility calculator that can tell you your credit rating, and whether an application to a credit card provider is likely to be successful based on your credit rating

How to manage a credit card for bad credit

If you apply for this sort of credit card, it’s really important to use it carefully.

Follow these tips to make sure the card helps your credit rating, rather than harms it:

• Avoid borrowing on these credit cards by setting the balance of the card to be paid in full each month. Interest rates are usually very high, so you’ll end up repaying much more than you borrow
• When you take out the card, opt out of letting the lender offer you automatic credit limit increases. That way you can keep control over the credit limit
• Stick to your credit card limit. If you exceed your limit, you can easily rack up further charges and interest, and it could make it harder to get further credit in future
• Make sure you pay on time each month. This will help build your credit rating. It will also help you keep any promotional offer that you’ve received with the card
• Always try to repay the balance in full each month but ensure you make the minimum payments. If you cannot afford to pay more than the minimum, seek advice as soon as possible and let the lender know if you are in difficulty – they may be able to offer help
• Never withdraw cash on a credit card. Withdrawing cash frequently is seen as a sign by lenders that you’re having trouble managing your finances, and may make them less likely to increase your limit or reduce your interest rate in the future
• Check your credit report using a soft search every few months, to see if your card use is improving your rating