Provided you use them carefully, by spending below your credit limit and paying off your balance in full each month, credit-builder cards should help increase your credit score. Your score will usually be updated two or three times a year.
There’s no way to improve your credit score quickly. If you have a low score, it’s usually because your financial history shows you as having struggled with debt in the past. The way to improve your credit score is to demonstrate better patterns of borrowing behaviour over significant periods of time. You’ll be able to borrow more money and get better rates of interest as you improve.
When you’re applying for your first credit card, you’re likely to have a limited or non-existent credit report. This can make you appear as a high-risk borrower as there is little or no evidence that you’ve responsibly borrowed money in the past.
Fortunately, there are still options open to you, but you might have less choice about the type of credit card you apply for.
There are low-income credit cards available, but none are available for people who have no money coming in whatsoever. While there is no legal minimum income for a credit card, card issuers are required to lend money responsibly, which means they all set a minimum income. They consider that someone with zero income will be unable to pay back the money they borrow.
Are credit-builder cards worth it?
How can I build my credit score fast?
How do I get my first credit card with no credit history?
Can I get a credit card with no income?
APR stands for Annual Percentage Rate and it represents how much it’ll cost to borrow money on a particular credit card. It’s calculated by taking into account:
Your interest rate
Additional fees and charges.
However, you might see the term ‘representative APR’ on adverts for credit cards – this means that the interest rate quoted only has to be offered to at least 51% of successful applicants, so it may not be the actual rate you get when you apply.
Credit card providers can change interest rates at any time, so it’s always a good idea to stay on top of your credit balance. If you have a 0% offer on your credit card, this will only be for a set number of months so you should make sure you clear your balance before it ends, or transfer your remaining balance to another 0% card.
You can apply for credit cards online, either using MoneySuperMarket or going directly to the provider, or by calling them up or through the post. You can also stop by your bank or building society branch and apply in person.
First consider what you want to use the credit card for – cards come with different features that are useful for different purposes.
If you have a large purchase coming up, you might want to spread the cost with a 0% purchase card, if you fly a lot you might want an airmiles card, and if you want to transfer a balance to avoid interest payments, a balance transfer card could be ideal.
By comparing on MoneySuperMarket, you’ll be able to see a list of credit cards, so you can browse at will and choose which one suits you best.
You’ll get a cooling off period of two weeks from when you receive your card, and you’ll have 30 days to pay off your balance. You can cancel by contacting your provider, either by post, phone, online, or in-branch.
However, if you want to cancel your credit card after the cooling off period, your account balance generally must be zero.
Your credit score is a number that represents your creditworthiness to credit lenders, based on an analysis of your credit history (your history of borrowing and paying back credit).
The higher your score, the more likely you are to be accepted for future credit applications. If your score is low, there are ways to improve it. MoneySuperMarket’s Credit Monitor lets you check your credit score for free and gives you tips on how to improve it.
A soft credit search is a way of finding out which credit cards you’re most likely to be accepted for without your credit score being affected. This is usually done via a website such as MoneySuperMarket.
A hard search on your credit report is a mark left by a lender who has assessed your credit rating after you have applied for a credit card. Too many hard searches (often through multiple applications) may make lenders think you are desperate for credit so it’s best to limit your applications for credit in a short space of time.
If you have a bad credit rating or you don’t have a credit history because you’ve never borrowed before, you might not qualify for the very best credit card deals. However, some credit cards are designed specifically for those who need to build up their credit score. Just be aware they often come with low credit limits and high interest rates.
However, if you use this type of card sensibly and always pay off your balance in full, you can improve your credit score so you’ll eventually be eligible for better credit cards.
If you miss a repayment on your credit card balance, you likely have to pay a penalty fee. What’s more, if you have any type of promotional offer with your card, such as an interest-free deal, this may be cancelled, and a missed payment may have a negative effect on your credit score.
If you get rejected for a credit card, this will leave a mark on your credit report and could lead to further rejections in the future. It’s a good idea to use MoneySuperMarket’s Eligibility Checker to see how likely you are to be accepted for a card before applying to get it, and it won’t affect your credit score.
You might be able to get more credit from your provider if you prove yourself to be a responsible borrower by repaying on time and never missing payments. Once you’ve established a good credit history, you might be successful when asking for a higher credit limit.
Unlike many loans and mortgages, you generally won’t be charged for making early repayments on your credit card – which means it’s a good way to get ahead of your balance.
You can’t get joint credit cards in the same way as bank accounts and mortgages, but you can add additional users to your own credit cards. However, you should remember that it’s still the primary cardholder’s responsibility to pay off the balance.
The Consumer Credit Act was established in 1974, and under Section 75 the credit card lender is jointly responsible with the retailer or supplier for any goods or services you purchase with your credit card.
This means if those products are faulty, or if there was any contract breach or misrepresentation on the retailer’s part, you can claim from your credit card company as well as the retailer.
However, you can’t recover money from both sides, so it’s useful for when the retailer has gone bust or they won’t respond to your communication. You should be aware the purchase value must be more than £100 and not more than £30,000 for you to be able to claim.
You can cancel your credit card by contacting your lender, by phone, email, online, post, or in person if they have a local branch.
What is APR?
Do interest rates change?
How do I apply for a credit card?
How do I know what card to apply for?
Can I withdraw a credit card application?
What is my credit score?
What is a soft and hard credit search?
What if I have a bad credit score or no credit rating?
What happens if I miss a repayment on my credit card?
What if I get rejected for a credit card?
How do I get more credit?
Can I pay off credit card debt early?
Can I get a joint credit card?
What is Section 75 of the Consumer Credit Act?
How do I cancel my credit card?