Credit cards can help rebuild your credit score if you’ve had debt problems in the past or have no credit history.

This article will help you understand how they work and choose the right one.

In this article, we describe:

Related contents: How to build your credit score

This article may contain affiliate links that may earn us revenue*

What is a bad credit card?

Credit builder cards are a way for people with bad credit histories to repair their credit score. They can also be helpful for people who don’t have a credit history.

Your credit report is a record of how you’ve handled credit — like overdrafts, loans, or credit cards — in the past, as well as the arrangements you have in place today. It also includes details of whether you have kept your bills paid and whether you are registered to vote.

If you haven’t paid your bills or been unable to repay your loans in the past, your credit score will be low. And at this point, it can be difficult to get new credit.

Credit builder cards are designed to provide a small amount of credit to help rebuild your score, demonstrating that you can keep up with regular payments.

They can also be useful if you don’t really have a credit history.

For example, if you lived at home and all the bills were in your parents’ name, your credit report might not contain much data. It can also make borrowing difficult.

If you use them wisely, staying within your credit limit and paying back on time, credit cards will help you build a decent credit score. As your score improves, you will be more likely to be accepted for other types of borrowing.

How to Use a Builder Credit Card

There are a number of things you need to keep in mind before getting one of these cards.

1. Try to pay off the full balance each month

The most important thing to remember with a builder credit card is to pay your balance every month. in full. If you do, you won’t have to pay interest, because interest is only added to your balance if you don’t pay it by the due date each month.

Avoiding interest is very important on builder credit cards because the interest rates (APR) on these cards can be very high. The representative APR ranges from a high rate of 27.5% to an extremely high rate of 59.9%.

If you’re struggling to stay organized with your repayments, you should set up direct debit to automatically pay the full balance each month for you.

2. Make minimum monthly repayments (at least)

Making the minimum repayment on your card each month is especially important for credit builders because failure to do so will result in a negative mark on your credit report. You will also have to pay a late repayment fee.

The minimum repayment is the minimum you are allowed to pay each month. But you should always try to pay as much as you can. If you only make the minimum repayments, interest will accrue and it will take you a lot longer to pay off your debt.

3. Use the card for regular small payments

Using your card for small purchases makes it easier for you to meet your credit limit and pay off your balance each month. Don’t use your card for large purchases that you can’t pay off in a month, like a TV.

4. Never withdraw money

With credit builders – like most credit cards – you’ll be charged interest immediately on cash withdrawals, so it’s best to avoid cash altogether. There are also additional fees for cash withdrawals, which can reach 5%.

5. Check your eligibility before applying

Complete credit card applications appear on your credit history. Lenders are less likely to accept you if they see that you have applied for multiple credit cards.

Before applying, use an eligibility checker. These are available on some credit card providers’ websites and tell you your likelihood of being accepted – and should also tell you what rate you’ll get. They only perform a “soft” credit check, which does not affect your credit score.

Most credit cards will advertise what they call the “representative APR”. This is the interest rate they have to offer to at least 51% of new customers.

However, some providers charge much higher interest rates to the remaining 49%. That’s why it’s important to use an eligibility checker – so you can have reasonable certainty about what terms you’re going to get, before you have to commit to your application and leave a permanent mark on your application record. credit.

Some comparison sites, such as Moneysupermarket, have built-in eligibility checkers – so your comparison results give you a percentage chance of being accepted.

Read more: Should I take out a loan to build my credit rating?

Best credit cards for bad credit

Our ratings are compiled by the independent research group Fairer Finance. Product reviews examine the costs and benefits of credit cards.

Five-star rated credit builder cards must have a representative APR and a maximum APR not exceeding 34.9%.

They must also have average or below average cash transaction interest rates, balance transfer interest rates, cash withdrawal fees and balance transfer fees credit.

Customer experience ratings are based on regular customer research. They take into account:

• Happiness and confidence in organizations and products
• The degree of transparency of the relationships of companies with their customers
• How well they handle customer complaints

Capital One Classic Credit Card

Best Versatile Credit Builder

Capital One’s classic credit card is our top choice for building credit. It is rated five stars in our independent rankings due to its competitive interest rates and fees.

Unlike many other credit builder cards, which have a wide range of possible interest rates (going up to 69.9%), its maximum APR is the same as its representative APR: 34.9%.

Main characteristics:

• Representative and maximum APR 34.9%
• Credit limit of £200 to £1,500
• Email alerts to help you stay on top of your spending

Capital One is an established provider and over four million people have been accepted for a Classic card. You can use the eligibility checker on their website before applying to see if you will be approved and what APR you are likely to be offered. It will not affect your credit score.

You can set your initial credit limit at £200 if you want to limit your spending, but you may be eligible for up to two credit limit increases per year.

If you want to rebuild your credit score and save on online shopping, Capital One has teamed up with Very.co.uk to offer a version of their classic credit card that includes a £10 cash back on your first buy online at Very.co. UK.

HSBC classic credit card

Best for low APR

If you want to build credit at one of the largest banks in the world with a below average interest rate, look no further than the HSBC Classic Credit Card, which is rated five stars in our ratings of products.

Main characteristics:

• Representative APR 29.9%
• Credit limit of £250 to £1,000
• No annual fee

Although the credit limit is slightly more limited than other providers, the HSBC Classic Credit Card has no annual fee and comes with a range of offers and discounts on purchases, travel and the restaurants.

The Tesco Foundation credit card has a slightly lower representative APR of 27.5%, but if you have a lower credit rating you might be offered an APR of 39.9% with Tesco, so the card HSBC Classic credit will work best for many people.

Remember, though, that you should avoid paying interest on your card if possible. If you clear your balance in full every month, APR should not count.

Zopa credit card

Ideal for spending abroad

Zopa is a growing app-based bank and its credit card is no exception – it received five stars in our product reviews.

Main characteristics:

• Representative APR of 34.9%, but rates can go as low as 24.9%
• Credit limit of £200 to £1,500
• Foreign purchases free of charge

Although there is no charge for spending abroad, there is a £3 charge for all ATM withdrawals.

Zopa has a user-friendly app where you can easily manage your card with instant payment notifications and balance updates.

The “credit cushion” feature also allows you to set aside a portion of your available credit limit so you can access it when you really need it, which could come in handy if you’re in need.

Great for benefits and customer experience

If you want to boost your credit rating and earn rewards at the same time, the Tesco Foundation Credit Card might be right for you.

Main characteristics:

• Representative APR 27.5%
• Credit limit of £250 to £1,500
• Earn Tesco Clubcard points by spending

The Foundation Credit Card allows you to earn 1.25 Tesco Clubcard points for every £1 spent at Tesco (and 0.125 points for every £1 spent elsewhere). These points can save you money on your purchases.

Tesco also received a gold ribbon for customer experience in Fairr Finance’s Spring 2022 Customer Experience Ratings, ranking fifth out of 31 brands for customer happiness.

Although this card has a low representative APR, the rate offered to you could be as high as 39.9%. There is also a hefty cash withdrawal fee of 3.99%. As a result, this card only gets three stars in Fairer Finance’s product ratings.

*Any products, brands or properties mentioned in this article are selected by our editors and editors based on first-hand experience or customer feedback, and are of a standard we believe our readers have come to expect. .

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