Credit Cards for Bad Credit: How to Compare and Apply
Credit cards for bad credit help people with a poor credit history to rebuild their credit score. There are steps you can take to apply and get approved.
Credit cards for bad credit work the same way as a regular credit card, but they accept more applications from people with poor credit, charge a higher interest rate and come with lower credit limits.
What is a credit card for bad credit?
These cards are designed for people with a bad credit score, which means you are more likely to have your application accepted. Credit cards for bad credit could be a good option if:
- You’ve previously missed repayments on your debts
- You’ve had county court judgments (CCJs) against you in the past
- You’ve been declared bankrupt
What is a bad credit score?
Your credit score is a figure used by lenders to decide whether you are likely to be a reliable borrower. It is compiled by a credit reference agency based on a range of factors including whether you have been late making debt repayments in the past, if you have ever failed to repay a loan and how much outstanding debt you have.
What is the minimum credit score required to get a credit card?
There are three credit reference agencies in the UK: Experian, Equifax and TransUnion. They each have different scoring systems, so different numbers represent good and bad credit scores with each.
- Experian score from 0 to 999, with a poor score defined as anything under 720
- Equifax score from 0 to 1,000, with a score of less than 438 regarded as poor
- TransUnion scores range from 0 to 710, with anything under 566 seen as poor
You can check your credit score for free with any of the credit reference agencies.
If you have a score that falls into the poor range, you are very likely to be rejected for mainstream credit cards. This is where a credit card for bad credit can help.
How credit cards can help repair your credit score
The more evidence there is that you are a reliable borrower, the higher your credit score likely will be. This means showing that you can handle debt and repay it on time. A credit card can help because it allows you to borrow small amounts and repay them in order to build up a credit history that shows you can be trusted to repay your debts.
How to choose a credit card for bad credit
All credit cards for poor credit are not the same. If you have bad credit due to limited credit history, a credit builder card might be a better option. If a credit card for bad credit is right for you, take the time to shop around to make sure you are getting the best deal.
This is what to look out for:
- Interest rate. The interest rates on credit cards for bad credit are higher than average, and vary a great deal, so compare rates and go for the lowest rate you can.
- Interest-free offers. Some credit cards for bad credit have interest-free offers on purchases or balance transfers. This means you’ll pay no interest for the first few months.
- Fees. Many credit cards for bad credit don’t charge an annual fee, but some do. Try to avoid the ones that do.
How to get a credit card if you have bad credit
If you have a poor credit rating, the last thing you want to do is apply for lots of credit cards. When you apply, the credit card firm will perform a search on your credit report that is visible to other lenders – known as a hard search. If a lender sees you have made lots of credit applications, they are less likely to give you a credit card as it will raise concerns that you are having money problems.
Before you apply, use an eligibility checker. These perform a soft search on your credit file. Soft searches are not as detailed as a hard search and won’t show up on your credit file, but they still can show you which cards you are likely to be accepted for.
You can search for a credit card for bad credit on price-comparison websites. Once you’ve picked your card and used an eligibility checker to see if you are likely to be approved, it is time to apply.
» COMPARE: Credit cards for bad credit
How to use a credit card for bad credit
Use a credit card for bad credit wisely and it can help you improve your credit score. Just make sure you:
- Stay within your credit limit
- Pay your bills on time
The interest rates on these types of credit cards can be very high. However, if you pay off what you owe in full each month, you should be able to avoid paying any interest at all.
What can I do if I don’t qualify for a credit card?
If you are rejected for one credit card, don’t immediately apply for another one. Making lots of credit applications can damage your chances of being approved.
Instead, take a look at your credit report – you can check it for free with Experian, Equifax or TransUnion. Take steps to improve your credit rating, including registering to vote (this helps in verifying your address) and making sure there are no mistakes on your report. Read our guide to improving your credit score to find out more.
It can take a few months for your credit score to improve. Wait, then try an eligibility checker to see which cards you stand a chance of being approved for before you apply.
Ruth is a freelance journalist with 15 years of experience writing for national newspapers, magazines and websites. Specialising in savings, investments, pensions and property. Read more