Finding a credit card if you’ve missed debt repayments in the past might seem an impossible task, but there are cards specifically designed for those with a less-than-perfect credit score.
These are known as ‘credit builder’ cards, and can serve the dual benefit of granting you access to credit while helping you rebuild your score over time.
Credit scoring and credit builder cards
It’s important to check what your credit score is as it’s one of the primary factors lenders use when deciding to offer you credit. If your score isn’t great, it’s unlikely you’ll be eligible for a market leading card with a competitive interest rate.
That’s where MoneySuperMarket’s Credit Monitor app comes in. Through Credit Monitor you will only be showcased the credit cards you are likely to get. This means a lower chance of rejected applications or negative marks on your credit report off the back of an application not going through.
A unique service also offered through Credit Monitor is personalised tips on how you can improve your credit score.
We tell you the factors that may have caused your score to change and use these insights to suggest personalised actions you can take to get your score climbing. As your score begins to increase, so will the range of credit cards you can choose from.
How credit builder cards can improve your credit score
Credit builder cards can help you improve your credit score providing you follow these golden rules:
- Make your monthly repayments on time (in full if you can, or at least the minimum payment due)
- Stay below your credit limit
- Avoid taking out additional credit cards and loans
Providing you stick to these, you should see your credit score climb. Some lenders will increase your credit limit should you demonstrate you’re responsible with your card, while others can also reduce your interest rate as a reward for managing your account well.
What to look out for
While credit builder cards can be a viable alternative for people who aren’t eligible for any other type of credit, there are some pitfalls to be cautious of.
If you have a poor score, lenders are likely to view you as high risk and therefore charge higher interest rates. If you’re considering this type of card, you must be certain you can clear your balance in full each month otherwise the repayment might become unmanageable.
You must always make your payments on time too, otherwise you could be hit with steep charges and you’ll damage your credit score further.
Bear in mind too that credit limits on this type of card tend to be very low, typically starting from around £250, to begin with.