Good choices for bad credit cards
Having poor credit can sometimes seem like an endless cycle. You may feel like you're constantly being rejected for financial products. Payday loans can sometimes seem like the only option available. However, there are alternatives.
Many institutions offer credit cards for those with bad credit. Although the APR may be a little higher than with regular cards, they still offer competitive rates for those with poor credit ratings. In this article, we take a look at some of the best choices available if you have bad credit. We'll also examine the factors that impact your eligibility for financial products.
What is a bad credit card?
When your credit rating is low, you will likely find that most mainstream credit card providers will reject your application. The same is true if you haven't built up a credit record. Bad credit cards are cards for those customers who aren't eligible for mainstream credit cards.
These types of cards can be incredibly useful for gradually increasing your credit score. Of course, this depends on you making your full repayments each month. There is a catch too. Bad credit cards will often have a higher APR (usually around 29-35%) than standard alternatives. Lenders put these restrictions on for those who haven't sufficiently proved they're a good borrower. If you have a history of not paying back credit on time or haven't borrowed before, a bad credit card might be all you qualify for.
Can I still get financial products with bad credit?
It's not all doom and gloom if you have poor credit. There are a number of options available to you that can help you manage your financial situation.
These include bad credit cards, as well as other products such as bad credit loans in the UK
Personal loans. In the same way that there are credit cards for those with poor ratings, there are loans too. These can be useful for consolidating debts and helping you to rebuild your credit score. They usually have a fixed interest rate that can be a little high.
Payday loans. Short-term loans will typically be afforded to most customers. However, they have incredibly high-interest rates, making them a very expensive way of borrowing. They should not be used as a long-term fix for your problems.
Debit cards. Although not a form of credit, debit cards can help you to manage your money more effectively. You can only spend what you have, and it won't impact your credit rating.
How is my credit score calculated?
There are a wide variety of factors that impact your credit rating. The main ones are focused on your prior history of repaying credit. If you have a limited or no record of taking money and paying it back, this will negatively impact your score. Similarly, if you've borrowed in the past and missed payments, this will decrease your rating. Other factors include your salary, whether you have any county court judgements, and whether you're on the electoral register.
When you apply for a credit card or other financial product, your credit score will be checked. If you are repeatedly rejected by lenders, this will also impact you.
Can I improve my credit score?
The short answer to this is yes. It may take some time and concerted effort, but you can definitely increase your credit rating.
Below is some general advice to help you get started with improving your credit score
Don't exceed your credit limit. Lenders need to see that you're a responsible borrower and not living beyond your means.
Use a credit card. If you have a card, use it, even if it's sparingly. You can't build up your credit rating if you don't use.
Always make your payments. Missing a repayment can be costly in terms of interest and the effect it has on your credit rating.
Pay your balance off when you can. Paying your monthly balance off in full will show that you're good at using your money.
The best bad credit cards
Below, we've highlighted some of the best bad credit card deals available. These can help you manage your finances and get the credit you need, without costing you too much.
The aqua Classic gives customers some useful features. It's ideal for those with a limited credit history, as we've outlined below:
An APR (variable) of 29.7% to 59.9%. The lower of these is one of the best we've seen for this type of card. It's still high, but not impossibly so compared to other means of finance.
You can start with a credit limit of £250-£1200, which has the option to be extended after four statements.
Available provided you're over 18 and a permanent UK resident. You must not have been registered bankrupt in the last 18 months or have a CCJ in the last 12.
This Visa card has one of the lowest APR rates on any card of this nature. There are plenty of features that make it attractive for those with bad credit:
29.3% APR (variable up to 59.9%. There are few cards with better rates than this. However, as with all of these cards, you don't want to carry a balance on it with these rates.
You start with a credit limit of £250 to £1000, but this can be increased up to £4000 over time.
Available to UK residents over the age of 18. Other stipulations include not being bankrupt, not having a Vanquis Bank card, and not being declined for similar cards in the past six months.
Tesco has an appealing MasterCard that is specifically designed for those looking to improve a poor credit rating:
An APR of 27.542% (variable) on purchases and balance transfers. Customers can collect Tesco Clubcard points when using the card.
A starting credit limit of £250-£1500 which can increase at regular intervals.
Applicants must be over 18 and UK residents with an income of at least £5000 a year.
For those with a limited credit record or without a history, this could be a useful card to build up your score:
The 29.7% (variable) APR is a little higher than some of the other cards but still better than many.
Customers can access a credit limit of up to £1200, even if you have a limited credit history.
Those who are over 18 and permanently live in the UK are eligible unless they have been declared bankrupt in the past 18 months.
Much like the Tesco card above, this one from ASDA allows customers to earn points while they spend. It's a good card for building credit ratings:
An APR of 34.9% is a little higher than some of the other deals. However, it's manageable provided you pay it off every month. You can earn 1% cashback on all spends in ASDA and 0.2% on all other transactions.
The modest credit limit of £100-£600 means you can slowly build your rating without overstretching.
This card is available for those who are over 18 and have an income of at least £10000 a year.