Balance transfer options for lower credit scores

If you're committed to building your credit score and paying off debt, you have options.

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Rebuilding your credit can seem daunting, but it doesn’t have to be. If you’re feeling trapped, you’re not alone. Many Brits with poor or no credit are looking for solutions to improve their financial health.

Balance transfer credit cards let you move your existing debt onto a new credit card and benefit from an introductory low or 0% interest rate. For that introductory period, more (if not all) of your monthly payment will go towards clearing debt, rather than towards interest charges.

Balance transfer cards can offer 0% periods that last over two years, but sadly the longest deals are reserved for people with good credit scores. The good news is that there are balance transfer deals out there for those with less than perfect credit scores, even if they are more of a rare breed.

Compare balance transfer credit cards for bad credit

Table: sorted by length of 0% balance transfer offer, promoted deals first
Updated October 20th, 2019
Name Product Balance transfers Balance transfer fee Purchases Rep. APR Incentive Representative example
0% for 18 months reverting to 24.9%
2.99%
0% for 3 months reverting to 24.9%
24.9% p.a. (variable)
Representative example: When you spend £1,200 at a purchase rate of 24.9% (variable) p.a., your representative rate is 24.9% APR (variable).
0% for 9 months reverting to 29.94%
4% for 9 months reverting to 5%
29.94%
29.9% p.a. (variable)
Representative example: When you spend £1,200 at a purchase rate of 29.94% (variable) p.a., your representative rate is 29.9% APR (variable).

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Approval for any credit card will depend on your status. The APR shown represents the interest rate offered to most successful applicants. Depending on your personal circumstances the APR you're offered may be higher, or you may not be offered credit at all. Fees and rates are subject to change without notice. It's always wise to check the terms of any deal before you borrow.

How does a balance transfer card for bad credit work?

If you have a large outstanding debt that’s incurring a high rate of interest, paying the minimum monthly repayments won’t make much of a dent. Even if you aim to pay more, a sizeable part of your repayment will go towards interest.

Balance transfer cards temporarily lower your interest rate so you can make a dent in your debt. In an ideal world, you’d want to clear the balance before any introductory low or 0% interest period expires. When the introductory rate expires, any outstanding balance starts accruing interest at the much higher “standard” rate. If you know that you won’t fully clear your balance before any introductory offers expire, then the revert rate should be an important factor in choosing a card.

Crucially, transferring a balance usually involves a fee – referred to as the “balance transfer fee”. These are generally worth shouldering to get to the low rates, but it’s important to factor this fee into your comparison. Since the fee is usually a percentage of the balance to be transferred, the larger your existing card debt, the more significant the transfer fee.

Provided you make all payments on time, the card issuer will report this back to credit reference agencies, which is likely to benefit your credit score.

Am I eligible for a balance transfer card?

Realistically, if you have a low or poor credit score, it can be difficult to get approved for a balance transfer card. The higher your credit score, the more options you have, and the longer the interest-free periods offered to you. However, there are cards and card issuers that specifically focus on those with lower credit scores.

Once you’ve found a card issuer that considers applications from less-than-perfect credit scores (see our comparison table, above), you should look to see if it offers an “eligibility checker” facility. This will give you a clear indication as to your likelihood of getting approved, what level of credit limit you might expect and what sort of interest deal you’d be offered (some issuers might be willing to offer you the card, but with a shorter 0% period than advertised). It won’t affect your credit score because it involves a “soft” search of your credit file.

A soft search is different to an application for credit – where lenders will run a full, “hard” search of your credit file. A hard credit search usually has a small (and typically short-lived) negative effect on your credit score. For this reason, you shouldn’t make multiple applications for cards in a short space of time.

Most card issuers now offer an eligibility checking tool on their website, but refer to it by other names. However a lender refers to this facility, make sure it includes a disclaimer somewhere on the page stating that using it won’t have an impact on your credit score. You’ll need to enter a few basic bits of information, such as your name, date of birth and address details for the last three years.

Don’t forget that credit scores aren’t the only factor that lenders base their decisions on. Minimum requirements vary from lender to lender, and some will quote a minimum income. Most importantly, a responsible lender should strive to make sure that any credit offered is affordable for the borrower.

How to compare balance transfer offers

Once you’ve checked your eligibility, you should be in a better position to know which balance transfer deals are available to you. If you’re lucky enough to have plenty of options, here are some factors you can use to compare offers:

  • Balance transfer fees. Most balance transfer cards come with transfer fees between 1.5% and 4% of the amount you transfer.
  • Length (and rate) of balance transfer offer. Low or 0% offers are only for a certain amount of time and then the interest reverts to the card’s standard rate.
  • Standard interest rates. After any introductory rates are over, the standards rates will apply.
  • Transfer limits. Credit limits are generally tailored to the individual, and you’re allowed to use a specified percentage of that amount (normally around 90%) for your balance transfer. For example, you might be offered a credit limit of £2,000, and the cards balance transfer limit might be 90% of your credit, i.e. £1,800.
  • Annual fee. These fees are increasingly rare with balance transfer cards, and some providers that do charge one often waive it for the first year.
  • Purchase rate. Although balance transfer cards may offer a 0% or low interest rate on balance transfers, there could be a higher rate on purchases (for any new transactions you make on the card).

Woman in debt looking at her bills with calculator

How a balance transfer can help rebuild your credit

All credit card issuers report borrower activity back to credit reference agencies (CRAs) such as Experian or Equifax. Provided you stick to your repayments, you’ll build up a positive record. At the same time, provided you pay off more than you’re spending and being charged in interest, you’ll also improve your debt-to-income ratio.

Credit cards designed for those who need to build their credit are known as credit builder cards. Credit builders typically have less strict eligibility requirements that most credit cards, but higher rates and lower opening credit limits. In a few cases, these cards can come with balance transfer offers.

Specialist cards such as these can make good “stepping stone” products. The rates are relatively high, but the eligibility criteria are less strict. So they can be a smart way to transition to credit products with better rates.

What types of cards are available to people with bad credit?

Credit builder cards or prepaid cards can help you stick to a budget and encourage you to cut back on expenses. Prepaid cards don’t typically offer a credit facility.

Credit builder cards

Pros
  • Restore or build your credit score while making purchases.
  • Could offer access to credit even if you’ve been refused elsewhere.
  • May offer benefits such as 0% interest on purchases or balances transferred to the card.
  • Enjoy standard credit card benefits, such as payment protection if your goods are faulty or a mobile app to track your payments.
Cons
  • Unfavourable terms, such as high interest rates and low credit limits.
  • Limited rewards.

Compare credit builder cards

Prepaid cards

Pros
  • Can only spend money you have and avoid debt.
  • Can use them anywhere credit cards are accepted including online, stores, ATMs and paying bills.
  • Easy to get – no pre-approval needed.
  • You won’t pay interest on purchases.
Cons
  • Don’t report to credit bureaus, so using them won’t improve your credit.
  • Fees for reloading and transactions.
  • Normally not a credit product.

Compare prepaid cards

Will getting a balance transfer card affect my credit score?

When you apply for a balance transfer credit card, the lender will run a full credit search. This has a small (and usually short-lived) negative effect on your credit score.

The lender will then report to credit reference agencies (CRAs) information on each repayment you make. Provided you keep up with your repayments and use it responsibly, the card should only benefit your credit score.

Normally you’ll want to close the old credit card as soon as possible (especially if it’s a card with an annual or monthly fee). By closing the card, you might remove any temptation to use it for further spending, and you’ll have one less account to stay on top of.

However, there is an argument for keeping the old account open to benefit your “credit utilisation ratio”.

Your credit utilisation ratio is how much of your available credit you’re using. So if you have a balance of £500 and a credit limit of £1,000, your credit utilisation ratio is 50%. A low credit utilisation ratio is preferable and shows that you’re not maxing-out your credit.

Opening the new credit card could improve your “credit utilisation ratio”, which may have a positive effect on your score, but that’s provided you don’t use either card for additional spending.

Age of credit

A small part of your credit score is determined by the age of your credit. That means that a credit card you’ve had since student days actually looks good on your credit. Opening a new card can lower the average age of your credit.

The lure of a new credit card can bring the urge to overspend. If you open a balance transfer card in the hopes of getting out of debt, make sure you don’t make any new purchases and pay your bill on time.

Never withdraw cash on a credit card as the interest is usually charged immediately (unlike on purchases and balance transfers). Find out more about what is termed a cash advance on your credit card.

Bottom line

Having bad credit can severely hold you back. It can prevent you from buying a home or car (particularly on finance) or taking out a loan to cover a large expense (e.g. a new bathroom suite or boiler).

If you have credit card debt, you’re far from alone. According to The Money Charity, Brits owed a total credit card debt of around £70.35 billion in January 2018, with the average household owing £2,586.

If you’re looking for a better way to manage your debt, you have options. When your credit is low, focus on building your score so you can get a credit card or loan with a more competitive APR. Once you can qualify for a balance transfer card, you’ll save money while paying down your debt.

Frequently asked questions

We exist to help you find better. The offers we've compared on this page are from a range of products whose details we can track; we don't cover every product on the market...yet. Unless we've indicated otherwise, products are shown in no particular order or ranking. The terms "best", "top", "cheap" (and variations of these) aren't product ratings, although we always explain what's great about a product when we highlight it; this is subject to our terms of use. When you make major financial decisions, it's wise to consider getting independent financial advice. Always consider your own financial circumstances when you compare products so you get what's right for you.

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