Bad credit credit cards

If you have a bad credit history, it doesn’t mean that you can’t get a credit card. This is exactly where credit cards for people with bad credit come in. Read our guide for everything you need to know and how to get a credit card with bad credit. 

What are credit cards for very bad credit?

Credit cards for bad credit are, as the name suggests, credit cards which are available even if you have a bad or poor credit history. If you use a bad credit credit card properly, over time your credit score could improve. But what is bad credit, and who is eligible for such cards? And how do bad credit cards differ from normal cards?

What is bad credit?

The term ‘bad credit’ can often be incorrect in some cases. It means that your credit history is less than perfect. This is usually because you have been late or defaulted on some payments and so are perceived by any potential credit providers as being a higher risk. However, if you are new to credit altogether (just turned 18, or have never borrowed money or paid a bill before), you may fall under this description too. This is simply because you have never had the chance to prove your creditworthiness.

Rather than ‘bad credit’, then, it is probably more accurate to call it ‘not good credit’ – but that’s a bit of mouthful when you use it in a sentence…

How do I know if I have a bad credit rating?

You can check the state of your own credit history by applying to one (or all) of the 3 credit reference agencies. These are Experian, Equifax or TransUnion. You can apply online, over the phone or by post. These 3 agencies will provide you with a statutory report upon request. Alternatively, you can sign up for one of their online services, which range from completely free to around £15 per month.

Once you have received your credit report, you should ensure that all of the details and records are correct. If there are any anomalies, you should contact the agency immediately and request that the information is amended or removed.

If, after checking your report, you find that you do indeed have a poor credit score, then it's worth refraining from applying for conventional credit cards. This is because you are unlikely to be successful. Multiple failed credit applications can have a further detrimental effect on your credit rating, too.

All is not lost though. There are credit cards available on the UK market for people who have no credit history or a less-than-perfect credit rating.

How are bad credit cards different to other credit cards?

Bad credit credit cards look and feel the same as conventional cards. They are backed by the same card processors (Visa and Mastercard), so they’re accepted anywhere you’d usually use a credit card (online, in stores, abroad, etc).

Where credit cards for bad credit differ is in the eligibility criteria, the APR, the credit limit, and the rewards on offer.

What is the eligibility criteria for credit cards for bad credit?

Because bad credit history credit cards are offered to those who find it difficult to access more mainstream credit, the eligibility criteria tend to be more easily achievable. Such criteria tend to include:

  • Must be over 18 (you must be over 18 to access any form of credit in the UK).

  • Must be a UK resident.

  • Minimum income (where this is cited, the minimum income tends to be relatively low, around £3,000 to £5,000).

  • Bankruptcy / CCJs – some issuers will accept people who have been declared bankrupt or who have CCJs against their name. Usually, they will require that some time has elapsed (no bankruptcy or CCJs in the past 12 months, for example).

  • Must not already hold another credit card within the same group of cards. 

Many credit cards for bad credit offer an eligibility checker service. This is where you can see how likely you are to be accepted before you formally apply. This leaves no hard or visible ‘footprint’ on your credit file, so it can be useful if you are shopping around for the best credit card for bad credit.

What APR can I expect from credit cards for bad credit?

Credit card providers perceive those with a bad credit history as being a ‘high risk’ (of defaulting). So, these credit cards tend to have a higher representative APR than more conventional cards, ranging from around 25% to 35%.

What credit limit will I get?

Because credit issuers want to see how you deal with credit and the repayment of debt, the credit limits offered are much lower than conventional credit cards. The limit can range from around £100 to £500.

Once you have proven that you can repay at least your minimum monthly repayments* on time and remain within your specified credit limit, most bad credit card issuers will increase your credit limit.

Credit cards and COVID-19

The coronavirus outbreak is affecting everyone around the world and has put a financial strain on many. If you currently have a credit card and are struggling to meet your minimum payments, help is at hand.

Measures have been introduced by the Financial Conduct Authority (FCA) that allow you to request a freeze on credit card repayments. This is to give those experiencing a change in financial circumstances due to COVID-19 some breathing space. This won’t leave a bad mark on your credit history due to the exceptional circumstances. 

You can apply for a 3-month payment holiday, which can be ‘topped up’ to a total of 6 months; you have until 31 March 2021 to request your payment holiday. Make sure you’ve agreed to it with your lender before you stop paying!

If you can afford to make repayments it’s best to do so, as you will still be charged interest during this holiday period. You might end up paying more in the long run so only request it if you really need it.  

What rewards will I get?

Many market-leading cards in the UK today come with a tantalising array of benefits, such as cashback, loyalty points, airmiles, or discounted purchases. By contrast, credit cards for bad credit do not offer such luxuries on the same scale. However, with growing competition in the UK bad credit card market, there are still some perks to be had:

  • Cashback (you’ll probably only get around 0.5%, and the total cashback per month is usually capped).

  • 0% balance transfer deals (usually capped at around 6 months).

  • 0% purchase deals (again, usually with a limited promotional period).

  • 0% money transfers (limited time).

  • Free access to your credit report.

Will a credit card for bad credit improve my credit rating?

Yes, but with stipulations. You must keep your spending to within your credit limit, and you must pay at least your minimum payment on time every month.* The credit card issuer will then report back positively to the credit reference agencies, and this will, over time, improve your credit rating.

While using your bad credit card to rebuild your credit, it makes sense to regularly check your credit rating with the credit reference agencies. Once it has improved sufficiently, you might like to apply for a more conventional credit card and avail yourself of all the benefits on offer.

Credit cards for bad credit FAQ

Will I be offered the Representative APR with my bad credit card?

Not always. The Representative APR is what the credit card issuer offers to 51% of its customers. This means that the remaining 49% could be paying a different (mostly higher) rate. Before applying for a credit card, it is always best to apply through an eligibility checker, which doesn’t leave a mark on your credit score, to see what rate you are likely to be offered.

What credit limit will I be offered on my credit card for bad credit?

Most cards for bad credit will state the parameters of the credit limit from the outset. You should make yourself aware of the minimum and maximum before you apply to ensure it’s sufficient for your needs. Also, before officially applying and leaving a mark on your credit history, you can check out your likelihood of being accepted, and with what credit limit, with an online eligibility checker. If you apply and are accepted, your credit limit is not necessarily set in stone. You can improve your credit limit with good money management, staying within your limit and making at least the minimum monthly payment on time.

Can I use my card for poor credit abroad?

Yes, but you should check the fees and charges of your particular card. You will most likely be charged a foreign transaction fee for using your card for purchasing, and a foreign ATM fee for taking cash out abroad. If you want to avoid these charges, you should have a look at the range of prepaid travel cards. These cards often offer better value for money, and you don’t need to undergo a credit check in order to get one.

When can I apply for a credit card with a better APR?

Using your bad credit card sensibly and responsibly over time (staying within your credit limit and making repayments) should result in an improvement in your credit rating. You should check your credit score regularly with more than one of the credit reference agencies (TransUnion, Equifax, Experian), and watch for any improvements. It is worth noting that some credit cards for bad credit issuers offer free access to your credit report as a benefit. Because it is detrimental to your credit rating to have multiple credit card applications in quick succession, you may want to wait for around 6 months before you apply for a more conventional card. And because your credit rating has been less than perfect in the past, it would also be sensible to apply for a credit card using an eligibility checker, so that it does not show on your credit history.

Are there any alternatives to credit cards for people with bad credit?

If you have been turned down for a bad credit card, or are simply looking for something else, you should check out the range of prepaid cards on offer. Prepaid cards do tend to charge a monthly fee, and need pre-loading before you can use them, but with the credit building option that some cards offer, they can be a powerful tool to rebuild your credit score.

8 February 2021