How the right credit card can boost your credit score

Credit builder credit cards

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Credit builder credit cards are specifically designed for people with a less-than-perfect credit rating. 

Woman on the sofa with her tablet and a credit card

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The cards usually come with a low credit limit, but this can increase over time if you manage your payments well.

By sticking to your credit limit and making all your monthly repayments on time, you’ll help to improve your credit score and demonstrate to other lenders that you can borrow responsibly.

Building a history

Credit builder cards aren’t only suitable for those who have a poor rating because they have missed debt repayments in the past. They can also help you if you haven’t previously borrowed.

Although you might think not having had a credit card or loan previously might work in your favour when it comes to making credit applications, it actually means lenders can’t work out what sort of borrower you will be as you haven’t built up a credit history, and any application you make is more likely to be turned down.

Taking out a credit builder card enables you to build up a credit history, showing lenders that you can make repayments on time.

Your improved credit rating should help you later on if, for example, you need a mortgage to get on the property ladder, or you need to take out a personal loan to buy a car or make any other major purchase.

Check the rate

The downside of credit builder credit cards is that they usually charge much higher annual percentage rates (APRs) than standard credit cards. 

That means it is really important to pay off your balance in full each month if you don’t want to be hit with steep interest charges. Never just pay the minimum each month, otherwise interest will soon mount up and you could struggle to repay what you owe. 

If you’re worried about remembering to make monthly repayments on time, set up a Direct Debit at the outset so that you pay off your balance every month automatically.

Other ways to improve your credit rating

Applying for a credit builder credit card isn’t the only way you can boost your credit score.

It’s a good idea to get hold of a copy of your credit report from one of the three main credit reference agencies, Experian, CallCredit or Equifax, to check that it is correct. 

If, for example, your report shows that you have missed a repayment in the past, and you know that isn’t the case, you can get in touch with your credit provider and ask them to amend their records. If they won’t, you can put a ‘notice of correction’ on your report yourself, explaining why the information showing is incorrect. 

Regularly checking your report will also enable you to spot if there’s been any fraudulent activity which might damage your score, such as someone opening accounts in your name.

You should also close down any credit card accounts you no longer use, and check that you have registered to vote and are on the electoral roll. 

Where to next?

What is a good credit score?

Compare credit builder cards with Eligibility Checker

How to get accepted for a credit card

How to rebuild your credit score

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