Credit cards for bad credit

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Who is a bad credit credit card for?

A bad credit credit card can be good for younger borrowers who have a low credit score because they haven’t had a bank account in their name, or they haven’t borrowed before and they’re looking to build up their credit score.

It can also be a good option for small businesses and borrowers with a poor credit history because they’ve struggled to pay back money they’ve been lent in the past and they’re looking to improve their credit score.

A bad credit credit card can also make it possible for a borrower to rebuild their credit score after bankruptcy, but you may have to wait a certain amount of time after being declared bankrupt to be considered for this type of credit card.

What consumers are looking to use their credit cards for

A graph showing the motivations of consumers searching for credit cards and the percentage looking to pay no interest on their spending, build their credit rating, find a low rate card for everyday spending, pay no interest on their spending and other – according to MoneySuperMarket data correct as of July 2018.

What are the advantages of a bad credit credit card?

Some advantages of bad credit credit cards include:

  • The chances of being approved for this type of credit card are higher because they’re designed for people with a lower credit score
  • Some lenders may either increase your spending limit or reduce your interest rate if you continue to meet your monthly repayments and stay within your credit limit
  • Making your monthly repayments on time will help to rebuild your credit score, which can help to increase your chances of being accepted for a credit card with a higher spending limit and lower interest rates in the future
  • Bad credit credit cards don’t tend to come with annual fees.

What are the disadvantages of a bad credit credit card?

Some disadvantages of bad credit credit cards include:

  • Higher interest rates – APRs – to help lenders protect themselves in case you aren’t able to make the monthly repayments. So try to clear your monthly balance if you can
  • Lower spending limits to help make sure you’re able to afford the monthly repayments
  • If you don’t meet the monthly repayments and your account defaults, your credit card provider will let the credit reference agencies know, which means you’ll lose points on your credit score.

A graph showing the different ages of people looking to apply for a credit builder credit card

The age groups of consumers searching for credit builder credit cards, according MoneySuperMarket data from August 2016 – August 2018.

Other ways of building up your credit score

If you are thinking of applying for a bad credit credit card, there are steps you can take to help improve your credit score and your chances of getting accepted. These include:

  • Paying back any credit you’ve borrowed: lenders look at any outstanding balances you have on other credit cards and loans before they decide whether or not to lend to you.
  • Registering on the electoral roll: this will prove the address you give in your application is your current address.
  • Checking your credit report to make sure it’s correct: check that any addresses you’ve lived at are correctly listed in your credit report with one of the credit reference agencies, and make sure there’s no fraudulent activity on your credit report.
  • Not applying for multiple credit cards at the same time: multiple rejections at once can bring your credit score down. If you get a rejection from one provider, it can be a good idea to wait and find out why you were rejected for that card before you then apply for another.
  • Making sure your credit file isn’t linked to somebody with a poor credit score: this might be the case if you’ve signed up to a joint account or mortgage before because your credit files are then linked, and another person’s poor credit can then bring your score down too.

 

An image showing the percentage of people that need to pay off their credit cards

38% of people said they owed money on a credit card when asked if they needed to pay back any money they’d borrowed, according to a survey carried out by Mintel market research agency in April 2018.

Compare credit cards for bad credit

It’s a good idea to compare bad credit credit cards to help you get a better idea of what cards you are more likely to be accepted for before applying. MoneySuperMarket’s credit builder credit card Eligibility Checker asks you questions about your financial situation and will then show you credit cards you are more likely to be accepted for, based on what you could afford to spend and repay each month. It won’t affect your credit score.

You’ll be able to compare credit cards that are designed to rebuild your credit rating. You can sort the results by the “Highest approval likelihood” to then see the interest rates you’d have to pay on any balance transfers and purchases you make. Click into “Full product details” to see the terms and conditions for that card, and any fees and features that come with it.

Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

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