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.
Your credit score makes is one of the main factors that determines whether you get approved for credit and the terms you’re offered. Bad credit can reduce your chances of getting vital finance, like a mortgage, car finance or a credit card.
The good news is that there’s a whole growing niche of cards designed for those with less than perfect credit records, that help you build up or restore your credit history while you spend. Expect low, personalised opening credit limits and higher-than-average, personalised interest rates, in return for more lenient eligibility criteria.
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More about credit builder cards
What is a credit builder card?
These cards are also seen as entry-level credit, and a stepping stone to credit products with better rates. If you’ve never borrowed or taken out a loan (perhaps if you’re young and new to the world of credit cards), your credit record is likely to be pretty non-existent, and it can be difficult to get the all-clear on a card or loan application. Lenders have no credit history to analyse and don’t know if they can take the risk in giving you credit. In this situation, a credit builder credit card will help you to build a credit history from scratch.
Some card issuers like Vanquis and aqua specialise in credit builders, and offer a whole range of cards for this market, while the big household names like Barclaycard or Tesco Bank are more likely to have just the one card in their range that would be considered a credit builder.
What is the easiest credit card to get with poor credit?
You should compare cards from a range of issuers before using an eligibility checker, and you may opt to focus on companies like Vanquis, Tandem or aqua which offer multiple cards to cater to a wide range of credit profiles.
How are credit builders different to other cards?
How should I compare credit builder credit cards?
Using a credit builder credit card to improve your credit score is a serious decision. To make sure you are choosing the right option for you, there are a few aspects to consider.
- Know the fees and rates. The fee structure on a credit card will give you a good indication if you are able to afford the line of credit. This includes the APR on outstanding balances as well as the mandatory annual fees.
There are also circumstantial fees to keep in mind that apply in certain situations, like cash withdrawal fees, late payment fees and overseas transaction fees.
- Look out for benefits. Rewards on credit builder credit cards are not common but in some instances the issuer might include basic benefits such as 0% purchase periods and cashback.
You can save money on interest and fees by choosing a card that has benefits, as long as you stay within the credit limits and pay off the balance in full every month.
- Likelihood of getting approved. The last thing you want to do is to keep applying for credit cards when you keep getting rejected. This will damage your credit score even further and make it more difficult to get credit in the future. There’s often an eligibility calculator that you can use to give you an indication of how likely you are to get approved before applying. This will not affect your credit score and can help you compare credit cards by eliminating options that you are not eligible for.
What is APR?Credit card interest rates are usually advertised based on the Annual Percentage Rate (APR) that applies to the account. The APR is essentially the yearly cost to borrow. It is an industry standard term which all lenders must calculate in the same way.
APR can be a useful benchmark for consumers comparing credit cards, as it also takes into consideration any mandatory fees on the account.
However, the Financial Conduct Authority (FCA) states that this rate must be what 51 percent (or more) of people accepted for a card receive. This means that up to 49% of those accepted for a credit card will end up paying a higher rate. That’s why it’s often called “Typical” or “Representative” APR. It’s also important to remember that high fees can be offset by significant perks. A very premium card with a high annual fee is likely to have a high APR (as the APR takes into account the interest rate and the fees), but will also have some tasty benefits for the user.
Are credit builder credit cards a good idea?
It helps to look at both the positives and the negatives when deciding if a credit builder credit card is a good option for your current situation.
- Build your credit score. The main benefit of this type of card is the ability to restore or build your credit score while making purchases with it.
- Get access to credit. A credit builder credit card is an entry level option that will give you access to credit, especially when you’ve been refused elsewhere.
- Get interest free days. Almost all credit cards come with up to 55 or 56 days of 0% interest on purchases, provided you clear your balance in full each month. That means that, although credit builders have relatively high rates, you could potentially avoid paying interest altogether. Crucially, cash advances (withdrawing cash) won’t benefit from this feature.
- Enjoy other standard benefits of credit card ownership. Having a credit card when travelling is much safer than carrying around cash and is often required for certain services like hiring a car. It also provides protection when lost or stolen as you can easily cancel it to prevent fraudulent transactions.
- Unfavourable terms. To protect card issuers against the risk of the loan, a credit builder credit card will often come with high interest rates and low credit limits.
- Low limits. If you’re approved for a credit builder, you’re likely to start off with a low limit. These limits are tailored to the individual, but can be reviewed periodically.
- Limited rewards. Although some providers do offer 0% purchase periods or rewards, you are unlikely to get more lucrative rewards like air miles or perks like complimentary travel insurance.
What should I watch out for?
- Never miss your minimum repayments. This will result in additional fees and charges and damage your credit score even further. It’s always better to repay the full amount every month to prove to lenders you can effectively manage your debt.
- Avoid withdrawing cash. Cash withdrawals on any credit card are expensive. The rates on credit builder credit cards are likely to be even higher. If you regularly withdraw cash it might signal to card providers that you are cash strapped and they could refuse you credit going forward.
- If you are rejected, wait before applying for another card. Every time you get rejected for a credit card application, your credit score is impacted. It’s best to take a step back and find out why you were rejected before continuing.
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