How easy is it to get a credit card?

Being approved for a new credit card can be extremely difficult with a bad or poor credit rating. Here we show you how to improve your chances of being accepted for a ‘bad credit’ or ‘credit-builder’ credit card.

A credit card can be an excellent way to manage your finances if you choose the right card and use it in the right way. However, it will be much harder to be accepted for a new card if you have a bad credit score. Here we explain how to increase your chances of being able to open a new credit card even if you have a bad credit score.

How to apply for a credit card

Before making an application for a new credit card, you need to find the right card for you. Which card is right for you will depend on:

  • If you have a good or bad credit score

  • If you want to buy things and pay no interest

  • If you want to transfer a balance from an existing credit card and pay less or no interest

  • If you want to improve or start building your credit score

  • If you want protection against something going wrong with a big purchase

Understanding credit scoring

The days of it being easy to get a credit card are well and truly over. However, to improve your chances, it's a good idea to find out how creditworthy you are before applying for your first credit card, loan or mortgage. It may be harder than you think to be accepted for credit, especially if you have bad credit.

When you apply for a credit card, the credit card company assesses your application using credit scoring. The lender looks at your application details including:

  • Your income

  • How long you have lived at your address

  • How long you have been with your bank

The lender will also get information from a credit reference agency. Credit reference agencies, like, Experian, Equifax and Transunion (formerly Callcredit) hold information about your addresses, how you are managing your current borrowing, and if you have failed to repay money that you have borrowed in the past. 

Each bit of information in your application and from the credit reference agency scores you a different number of points. You are accepted for the card if your total score is higher than the required amount, and your application is refused if your credit score is not high enough.

There is no such thing as a universal credit score, and each credit card company and credit reference agency will calculate your score in a slightly different way. 

Eligibility criteria for a credit card

As well as having a good credit score, with some credit cards you may also need to:

  • Be over 18

  • Be employed, a student or retired

  • Have a bank account

  • Be a UK resident

  • Have a regular income – some credit cards require a minimum income of at least £7,000 or £10,000, for example. Although many credit cards do not need you to have a minimum income

  • Be free of County Court Judgements, Individual Voluntary Agreements or bankruptcies

Credit cards for bad credit

Some credit cards are much easier to get than other credit cards. ‘Credit-builder’ credit cards also known as ‘bad credit’ credit cards could help you improve your credit score if you have a low credit score or no credit history.

It's easier to be approved for a ‘bad credit’ credit card than other credit cards. However, they also have lower credit limits and tend to have higher interest rates than standard credit cards. So, it's best not to borrow money on a ‘bad credit’ credit card, and you should try to pay the card off in full each month when you get the credit card bill. 

Over time, if you can show that you can use a credit card sensibly by paying on time and not exceeding the credit limit, your credit score will be increased. You can then apply for a standard credit card.

What are ‘guaranteed approval’ cards?

If you receive an email or letter saying that you have been ‘pre-approved’ for a credit card, you may think that you are guaranteed to be approved if you apply. However, if you make an application, you could still be turned down once the credit card company has conducted proper check of your credit file and credit score.

What companies mean when they say ‘guaranteed approval’ or ‘pre-approved’ is that as far as the company can tell you are eligible for the card based on the information it already has about you.

Some credit card companies do allow you to check if you will be accepted for a card before you apply using a ‘soft search’ or ‘quotation search’. These searches are also sometimes called eligibility checkers. They allow a credit card company to confirm that you will be accepted before you make a credit application.

The benefit of a ‘soft search’ or a ‘quotation search’ is that it will not be visible to other lenders and as a result has no impact on your credit score. However, when you make a credit application, this is recorded on your credit file and is visible to other lenders. Contrary to popular belief, lenders cannot see if you were accepted or turned down for credit and can only tell that you made a credit application not what the outcome of the application was. 

However, one or more credit application searches in a short period can reduce your credit score, at least for a few months. To avoid your credit score being affected, it's always best to shop around for a credit card or loan using ‘soft searches’ or ‘quotation searches’ before making any credit applications.

How to improve your chances of getting accepted for a credit card

There are some things that you can do to help increase your chances of being approved for a credit card even if you have bad credit:

  • The bank where you have your bank account may be more likely to accept you for your first credit card because it can see money going into your bank account and what you spend your money on each month

  • Get a pay rise. Some credits cards have a minimum income requirement. The more you earn, the higher your credit score is likely to be

  • Apply for the right credit card with the right company. If you have a bad credit score, your choice of credit card that you are likely to be accepted for is much more limited

  • Register to vote. Lenders use the electoral roll to confirm that you are who you say you are and also to verify your current and previous addresses. As a result, being registered to vote will increase your credit score

  • Improve your credit score by asking your bank if you can have an overdraft on your bank account. However, make sure you only use your overdraft in emergencies as overdrafts are an expensive way to borrow money. Also, be very careful never to exceed your overdraft limit as this will lower your credit score

  • Don't miss monthly repayments. Setting up a direct debit to pay at least the minimum credit card repayment each month will mean that you don't ever forget to make a payment. Having a direct debit in place will also mean that your credit score is not reduced as the result of a missed or late payment

  • Don't go over your credit limit. If you borrow more on your credit card than your credit limit, your credit score will go down. Your credit score will also suffer if the balance on your credit card is too close to your credit limit. So, keep an eye on your balance and try not to let the amount you owe on your card get too near to your credit limit

  • Pay your mobile phone contract on time as this will be recorded on your credit file, will score you points and improve your credit score

Do's and don'ts of getting a new credit card

Do shop around to get the right credit card for you.

Do check if the credit card you are interested in has an annual fee. Annual fees can be quite expensive and are charged each year just for having the card. Many credit cards do not charge annual fees.

Don't apply for a credit card before checking you are eligible for the card.

Don't assume you will get the advertised deal.

Don't pay back just the minimum payment each month as this can be expensive and could take you many years to repay the money you have borrowed.

Don't withdraw cash from a cash machine with any credit card. Not only will you be charged a fee for each cash withdrawal, but interest is also charged from the moment you get the money until you pay the bill in full. With purchases on a credit card, you won't pay any interest if you pay the total balance on your credit card bill.

What to do if you are turned down for a credit card

There is no guarantee that you will be accepted for a credit card. The worst thing you can do is get upset and try applying for another credit card with a different credit card company straight away.

Instead, try and find out why your application was turned down. Write or speak to the company and ask it to reconsider the decision and ask if there was a specific reason for the refusal. Credit card companies are obliged to tell you if there was a particular reason for turning you down. For example, telling you which credit reference agency it used if this caused the rejection. You can then check what is on your credit file and correct it if necessary.  

However, if the decision was because of a low credit score and the credit card company turns down your appeal, all you can do is wait and apply again in a few months for the same card or a different card. 

Get an idea of your credit score for free

You can get an idea of your credit score using one of the free services offered by Clearscore or Credit Karma, for example. Checking your credit score is a great way to monitor how your credit score changes over time and hopefully improves, and you can also search for credit cards or loans without it affecting your credit score. 

12th June 2020