By Matt Fernell, Editor-in-Chief at Finance.co.uk. Published 8th April 2024.
Your credit record can determine what credit cards you can get, but having bad credit doesn’t mean you’re ineligible. Find out everything you need to know about getting a credit card with bad credit.
Credit cards for bad credit work in the same way as normal credit cards.
The difference is they can be easier to get if you have a poor credit score. However, you'll be charged a higher interest rate and offered a lower credit limit compared to credit cards offered to people with good credit ratings.
Credit cards for bad credit allow you to borrow up to an agreed amount, and you then pay back what you've borrowed. Interest will be added if you don't pay back the balance within a month.
Credit cards for bad credit ratings can help people build a better credit report because they demonstrate to future lenders you're a reliable borrower.
Bad credit means you have a poor credit history, which means you may have managed credit products poorly in the past. Your credit report is considered poor when your credit rating falls below a certain score.
There are three leading credit reference agencies in the UK. These companies provide your credit information to lenders and credit card providers. The agencies use different scoring, so what's considered 'bad' will differ between all three.
Experian - Scale from 0-999. A score below 720 is considered poor.
Equifax - Scale from 0-1,000. A score below 438 is poor.
TransUnion - Scale from 0-710. A score below 565 is thought to be poor.
There are several reasons why you may have a poor credit rating. Some factors which could cause you to have a poor credit score include:
You've not used a credit product before, so you don't have a credit history
You've had a CCJ filed against you
You've been declared bankrupt
You've mismanaged previous cards or loans, e.g. missed payments
You're not currently registered to vote
You’ve recently moved to the UK
It is possible to get a credit card if you have bad credit, but your choices will be limited, and you won’t be able to get the best offers.
When you have a poor credit record, it’s really important you don’t apply for cards you’re ineligible for. Having an application rejected can cause further damage to your credit score and make it even harder to get credit products in the future.
To ensure you're not unnecessarily applying for cards you won't be approved for, use an eligibility checker to find cards you're more likely to qualify for before applying.
This should show you a list of the cards you can get based on the information you provide. Eligibility checkers use a ‘soft check’ to look at your credit record that doesn’t leave a mark or damage your score.
To get a credit card in the UK, you’ll have to meet the rest of the provider’s eligibility criteria. This usually includes:
Being over 18 or 21
Having a permanent address in the UK
Having a steady income to cover the card repayments
It’s possible to get most types of credit cards when you have bad credit, but you might not be able to access all the benefits they offer or get the best terms. Cards you may be able to get include:
0% interest credit cards: This type of card is designed to spread the payment of a large purchase over several months, usually at 0% interest. If you have bad credit, any purchase cards you’re eligible for will probably have a much shorter interest-free period and offer lower credit limits.
Balance transfer cards: These allow you to transfer an expensive credit card balance to a new card with a 0% interest rate. You will usually need a good credit rating to get one, but some cards for bad credit do offer this facility.
Credit building credit card: This type of card is designed for those with bad credit. It comes with lower credit limits and higher interest rates than other cards, but using it correctly can help improve your credit score over time.
Rewards cards: These cards can earn you points or cashback on your everyday spending, but there are very few available if you have bad credit.
Your credit score is constantly changing, meaning you always have the opportunity to improve your rating to boost your chances of getting the credit cards you want.
Improving your credit score for Experian, Equifax, or TransUnion may take some work and some discipline, and what improves your score for one company may not for the other.
Although it’s possible to get credit cards for no credit or bad credit, improving your credit score will make it easier for you and help you get better offers.
Things you can do to work towards improving your credit score include:
Registering to vote
Updating or correcting details on your credit report
Avoiding late repayments on current credit products
Keeping old accounts open to build a credit history
Staying well within your credit limit. To build a good credit rating, remain under 30% of your total credit limit
Avoid making cash withdrawals on a credit card
Paying off any existing debt
As well as the above, one of the best ways to improve your credit rating is to use and manage a credit product well. That's why low credit score credit cards can be useful, because paying off what you've borrowed and keeping up with your minimum monthly payments can help prove you're a reliable borrower, boosting your score.
While your credit score improves, you may find your credit limit on your card rises over time.
Getting a new credit card when you have a poor credit rating is a big decision. It’s worth taking the time to work out if it’s really worth it because it could damage your rating further if you don’t manage the card correctly. Here are a few things to think about:
Do you really need the card? Consider if you need a credit card or if there are other options available. If it’s for a one-off purchase, can you pay for it in another way, or is it something you really need?
Can you pay off the balance each month? Credit cards for bad credit usually have higher APRs, so any outstanding balance will accrue expensive interest. That’s why it’s vital you can pay off your card each month to keep the cost down.
Can you keep up with payments? Using your new card sensibly by staying within the credit limit and making your payments on time can help improve your credit rating over time. This means you could be eligible for better deals in the future.
If you answer no to any of these questions, a credit card probably isn’t the right option for you. You need to be confident you can keep up with the payments and ideally clear the balance every month to save on interest and boost your credit score for the future.
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.
