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Credit cards for 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’ is a bit of a misnomer. In basic terms, it means that your credit history is less than perfect – usually that you have been late or defaulted on some payments – and you are, as a result, perceived by any potential credit providers as being somewhat 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, 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 three credit reference agencies – Experian, Equifax or CallCredit – either online, over the phone or by post. The three agencies must provide you a statutory report for £2 upon request – or alternatively you can sign up for one of their online services, which range from completely free to quite expensive (£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 makes sense to refrain from applying for conventional credit cards as 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 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 bad credit credit cards differ is in the eligibility criteria, the APR, the credit limit, and the rewards on offer.

What is the eligibility criteria on a bad credit credit card?

Because bad credit credit cards are offered to those who find it difficult to access more mainstream credit, the eligibility criteria tends 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, but 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 bad credit credit cards offer an eligibility checker service, 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 bad credit credit card.

What APR can I expect from a bad credit credit card?

Credit card providers perceive those with a bad credit history as being a ‘high risk’ (of defaulting), so bad credit 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 on bad credit credit cards, at least initially, are much lower than conventional credit cards, ranging from around £100 to £500.

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

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, bad credit credit cards do not offer such luxuries on the same scale. However, with growing competition in the UK bad credit card market, and credit card issuers fiercely vying for new customers, 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 six months).
  • 0% purchase deals (again, usually with a limited promotional period).
  • 0% money transfers (ditto).
  • Free access to your credit report.

Will a bad credit credit card improve my credit rating?

Yes, but with caveats. 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 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.

Bad credit credit card FAQ

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

Not always. The Representative APR is what the credit card issuer offers to 51% of its customers, meaning 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 bad credit credit card?

Most cards for bad credit will state the parameters of the credit limit from the outset, so 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: with good money management – staying within your limit and making at least the minimum monthly payment on time – many issuers will increase, or at least review your account after a period of time.

Can I use my bad credit credit card 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, which 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 credit card sensibly and responsibly over time – spending within your credit limit and making at least your minimum monthly payment on time – 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 (Callcredit, Equifax, Experian), and watch for any improvements. It is worth noting that some bad credit credit card 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 six 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 a bad credit credit card?

If you have been turned down for a bad credit 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.

Now read our complete credit score guide