Why the right plastic can be GOOD for your credit score

So you’ve never been in debt and never so much as touched a credit card. You MUST have a perfect credit score – right? Wrong.


While you may think that avoiding debt is a safe bet, you are actually giving banks and building societies little reassurance of how responsible – or not – a borrower you are. This makes them less likely to want to lend, which means you could have difficulty securing a mortgage or being approved for any kind of credit in the future.

Of course, a bad credit score can also come from a past mismanagement of debt and you’ll have to work just as hard to repair it. But in either case there are ways of doing this – and, while it might sound like a contradiction – one of them is to get a credit card.

Credit builder credit cards

There is an array of credit cards available on the market, many offering tempting benefits from long interest-free periods on balance transfers and purchases, to cashback and rewards. However, these are reserved for those with a pristine credit history and it’s highly probable you’ll be rejected if you apply with anything less.

But this doesn’t shut you out of the credit card market entirely – you can still apply for a credit builder credit card, which are designed exclusively for those with a less-than-perfect credit history.

Credit builder cards do exactly what they say on the tin – they allow you to build up your credit score by lending you money which you can then prove you have the ability to repay every month. But because you haven’t proved yourself yet, these cards come with a lower credit limit then mainstream cards and the interest charged is also a lot higher.

More choice when it comes to building credit

Recent months have seen the choice of credit builder cards expand considerably, with some even offering perks usually reserved for customers with good credit ratings.

LUMA for example, which is the latest credit builder card to hit the market, comes with three months 0% interest on purchases.  The credit limit offered will be a maximum of £1,500 but there’ll be no waiting around to see if you’ve been accepted as an online application will give you an answer in 60 seconds. 

While you have three months interest free on purchases, unless you can be sure you will clear the balance at the end of this time, don’t bother taking advantage of it. Any debt held on this card will be charged at a huge representative APR of 35.9% (variable) and you could end up in a worse position than you started.

Alternatively, the Aqua Reward Card, which came along in June allows customers to earn rewards while rebuilding their credit. The card pays 3% cashback on all spending, capped at £100 per year, as long as you stay within your agreed limit. Cardholders will also automatically receive text alerts to warn you when you are getting close to your credit limit, as well as monthly payment reminders – all of which will minimise the risk of damaging your credit rating further.

However, again, the representative APR on this card is a whopping 34.9% (variable) so it’s essential you pay off your balance in full each month and keep working for you, rather than against you.

You can search for these and other cards in the market at our credit builder cards at our designated MoneySupermarket channel.

Only apply for cards you’ll be accepted for

Don’t be tempted to apply for credit cards that you know you’re unlikely to be accepted for as this will serve only to damage your credit score further. Every time you are rejected it leaves a footprint on your file. This will be detrimental to your score which will take even longer to repair.

A good place to start if you are unsure of what cards you may be accepted for, is to use MoneySupermarket’s Eligibility Checker tool.

This will give you an indication if you will be accepted for certain cards without the search showing up on your credit report.

You may also want to order a copy of your credit report, to see exactly what the damage is. For just £2 you can order your basic, statutory report, but if you are looking for something more detailed that you can regularly access, you may want to sign up to an online service with one of the credit reference agencies such as Experian or Equifax.

To compare credit report providers go to MoneySupemarket’s credit report channel.

And when you’re score is a bit better…

Once you have repaired your credit score, you’ll be eligible for much better deals. For example, if you’re looking to make a big purchase and spread the cost over a number of months, you could apply for the Tesco Clubcard Credit Card.

This offers a generous 0% interest on purchases for 16 months and 0% on balance transfers for nine months. Once the interest-free period comes to an end, it has a representative APR of 16.9% (variable). The card also doubles up as a clubcard with every £4 spent in Tesco earning five points and every £4 spent elsewhere earning one point.

The most attractive card if you have existing debt, is the Barclaycard Platinum Credit Card with Extended Balance Transfer. This offers 22 months interest-free for those looking to move their balance from an existing card – although this can’t be from another Barclaycard. Once the interest-free period ends, the representative APR stands at 17.9% (variable).

Follow Clare on Twitter @Clare_Walsh

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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