Bad credit history credit cards - all you need to know
If you have a bad credit history, it can be difficult to get new credit, at least as a reasonable cost.
But there are credit cards specifically designed for those with bad credit records. They can give you access to funds and, when used correctly, can help you rebuild your credit rating.
What are credit cards for bad credit?
Credit cards for bad credit are designed for customers who don’t qualify for conventional credit cards, usually because they have a low credit score.
When used in the right way – by paying off the balance in full each month – they can help you to slowly repair your credit rating. But this comes with a price.
Anyone with a poor credit rating, whether because they have a history of mismanaging money or they simply haven’t proved they can be trusted as a debtor, is considered more high risk than someone who regularly pays off all their bills.
Because of this, providers of bad credit score credit cards tend to apply higher rates of interest. But if you clear the balance in full at the end of each month you won’t incur any interest charges.
How can a credit card help with poor credit?
Each time you pay your credit card balance in full and on time, you earn a good mark on your credit file. Over time, this will act as proof that you can manage your debt and help improve your poor credit rating.
These cards offer the same credit card consumer protection as other cards. The other benefits of using this sort of credit card is that they can:
lead to an increase in your credit limit
lead to a reduction in your interest rate
improve your credit rating so you may be able to apply for a mainstream card with a lower interest rate or introductory offer.
However, credit cards of those with poor credit files usually have a high level of interest, so they shouldn’t be used for long term debt.
You should only spend as much as you can afford to pay off each month to avoid hefty interest payments. It’s also rare to see any introductory offers on poor credit cards.
Compare bad credit cards
The market for credit cards for those with bad credit histories is becoming more competitive, possibly due to a slowdown in the rate of applications over the last few years. This means you may get a more enticing offer, such as an interest-free period, although these kinds of promotions are rare.
The most important thing to remember when comparing credit cards for bad credit is to avoid making multiple applications at the same time. That’s because each application leaves a footprint on your credit rating and having multiple applications on your record (especially unsuccessful ones) will push your rating down further.
MoneySuperMarket data. Correct as of December 2017
This is where we can help. We offer Smart Search, which is a card comparison tool will show you different cards along with the likelihood that you’ll be accepted for each – without leaving an adverse mark on your credit report.
In other words, you can use Smart Search safe in the knowledge that looking for a card in this way won’t harm your file.
When reviewing your credit card options, you should compare the interest rates on offer. Even if you plan to repay the balance in full each month, you should still try to find one with the lowest interest rate.
Take a look at the representative annual percentage rates (APR) as they can vary from 30% to 60% - if you find you can’t repay your monthly balance, this could save you a lot of money.
Representative Example: If you spend £1,200 at a purchase interest rate of 34.94% p.a. (variable) your representative rate will be 34.9% APR (variable).
Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.