Credit cards aren’t the only option for those looking to restore their credit score. Some prepaid cards, which require you to load up cash on them before you spend, also offer a bolt-on credit-builder facility. This is where the card provider effectively ‘lends’ you a year’s worth of monthly card fees upfront.
The loan itself is interest-free, but you will be expected to pay it back over the course of 12 months.
Details of how reliable you are with your payments will be passed to credit reference agencies and, if it’s positive, could help boost your credit score. This means you can help yourself - without risking getting into debt or paying any expensive interest.
How to choose the best credit builder card for you
Some important things to consider when you’re choosing a credit builder card include:
Don’t apply for a few at once: if you’re unsure of your credit rating then it’s not a good idea to try your luck and apply for a few different credit builder cards. Applying for a credit card creates what is called a ‘hard check’ on your credit file, and multiple hard checks can actually harm your score.
Check your eligibility: a good way to avoid hard checks is to use an eligibility checker that lets you see a range of different credit cards – and the likelihood of you being accepted. This way, you can consider all your options before you actually make an application.
Interest rates: the interest rates offered on credit builder credit cards aren’t likely to be the most competitive. But different providers will offer different rates, so it’s worth checking what’s available.
Benefits: different cards might offer different rewards and benefits. Whether it’s in-app banking, access to track your credit score or 24 hour customer service, it’s always good to compare credit builder card benefits. Choose the card that prioritises what you want from your credit builder credit card.
Comparing credit builder cards
As getting accepted is key when applying for credit builder credit cards, using a tool like MoneySuperMarket’s Eligibility Checker lets you compare what’s out there, and shows you the likelihood of you being accepted for each card. It asks for a few details such as your name, address, income and financial situation, and then shows you a list of credit builder credit cards.
Different cards will come with different rates of interest and some will even come with added benefits, such as the ability to earn rewards. You’ll be able to easily browse and weigh up which one suits you best. Once you’ve settled on a card that suits you, simply click through and apply.
The most important thing to remember with this type of card is that you must use it to your advantage. Defaulting on payments will result in you paying hefty rates of interest and getting caught in a debt cycle – and can damage your credit score even more.
It’s important to remember that if you want to be eligible for competitive deals in the future, you need to have a good credit score.