Finding the best bad credit catalogue for you
Catalogues for bad credit can be useful for a lot of people. Our guide will detail how they work, what to be aware of, and if they’re right for you.
What is a bad credit catalogue?
Shopping catalogues are retailers who sell goods via physical catalogues or online. What makes catalogue shopping different from other retailers is that you can spread the cost of your purchases via multiple payment methods such as monthly instalments or buy now, pay later plans.
Many shopping catalogues offer credit accounts to purchase items meaning you can pay back what you’ve borrowed over a period of time. Some providers may only allow you to borrow money if you have a good credit score.
If you have a poor credit rating, there are some catalogue providers that specialise in offering you credit, however, these types of accounts will typically have a lower credit limit – meaning you can’t borrow as much.
Catalogues designed for people with a poor credit history are also likely to have higher interest rates than other alternatives because people using them will be considered higher-risk borrowers.
When using a bad credit catalogue, also known as a low credit catalogue, you’ll only be able to use your account to purchase goods from one provider.
The only exception is if the credit account is open-loop, meaning it can be used on merchants within the same card network (such as MasterCard or Visa.) It’s unlikely a bad credit catalogue will be open-loop.
If you have a bad credit score and can’t get credit from other providers, a bad credit catalogue may be a good option if you need to make an emergency purchase to replace a broken item. Using this type of retailer does come with its own risks though.
What catalogues accept people with bad credit?
When compared to other credit lenders like banks, shopping catalogues will widely accept people with lower credit scores. If you can’t get credit from a high street bank because of your below-average credit score, you’re likely to get accepted for a credit account from a shopping catalogue.
However, be warned that some of the leading shopping catalogues will still not accept people with poor or no credit history and will conduct credit checks to make sure you’re eligible.
Instead, there are shopping catalogues specifically tailored to people who have bad credit. These catalogues are likely to have higher interest rates and smaller credit limits but are more likely to accept you, regardless of your credit score. The best catalogue for bad credit will likely offer interest-free periods and have a larger credit limit.
Some of these providers may not check your credit history either.
How do catalogues with credit work?
To purchase goods with catalogue credit, you’ll first have to apply to create an account – you won’t be able to shop with credit without one.
When applying to create a credit account with a bad credit catalogue, the lender will likely check your credit history to see how reliable as a borrower you are. Your credit report may impact the interest rate you’re offered if you’re accepted for an account at all.
Shopping catalogues can perform either a hard or a soft credit check. A hard credit check is when a company does a full search of your credit report. These types of checks remain on your report, and having a lot of them in a short period of time can harm your overall credit report, making it more difficult to get credit in the future.
Most of the time, bad credit shopping catalogues will conduct a soft check, which only looks at certain information and will not be visible on your credit report to future lenders. If you’re applying for multiple shopping catalogues, it’s best to opt for providers that perform soft checks to protect your credit report.
Some catalogues may not even conduct a credit check and instead may have their own methods to judge your eligibility. This commonly includes checking if you have an active current account and a regular income stream.
Once your credit account is created with your shopping catalogue of choice, you’ll then be issued a credit limit. This is the amount you can borrow to purchase goods in advance to then repay at a later date.
When getting an account with a bad credit catalogue, your credit limit will usually be low compared to other credit options.
When purchasing goods with bad credit catalogues, you’ll be able to choose your repayment terms. The common method is to pay back what you’ve borrowed over monthly or weekly instalments, typically between one and two years. The repayment terms you select can significantly impact how much you have to repay. This is because of the amount of interest you’ll be charged.
How interest works with bad credit catalogues
When you borrow money to pay for goods, you’re usually charged interest, which is an additional amount you have to pay back depending on how much you’ve borrowed.
The average interest rate for poor credit catalogues is a representative 39.9% APR, but can be a lot more.
Some bad credit catalogues only charge this interest after a set period. This means if you pay back the full amount of what you’ve borrowed by a set date given to you at the start of your repayment agreement, you shouldn’t be charged interest.
If you’ve not paid off the total amount borrowed by this date, interest may be charged on the remaining balance. The longer you take to pay off your balance, the more interest you’ll have to pay because interest compounds over time.
Let’s illustrate this with an example:
You borrow £300 to buy a TV from a bad credit catalogue which charges you an interest rate of 40% APR. You agree to pay £50 monthly instalments and have an interest-free period of two months.
After two months of repayments, you’ll have an outstanding balance of £200, to which the interest will apply to. This means you now owe £280 (the remaining balance plus 40% of that.)
You then pay another £50 for the following month. This reduces the remaining balance to £230. This new balance then has the usual 40% interest added to it, making it £322. You then also need to add the compound interest, which is the interest that the previous month’s interest acquires. This means you need to add £32 (40% of £80), resulting in an outstanding balance of £355.
This example demonstrates how interest can leave you paying back your repayments for longer with a higher total fee than what you originally borrowed.
This example also demonstrates continuous debt, which can happen if your repayments aren’t large enough to account for interest.
When paying back what you owe to a bad credit shopping catalogue, you’ll be offered a minimum amount to pay back every instalment. This amount is not the minimum that you need to pay to cover the costs of your debt; it’s just the minimum the lender will accept. To avoid continuous debt, it’s advised to pay more than the minimum payment you’re offered by the lender.
Some personal account catalogues for bad credit may also charge interest from the start of your repayment period. If they don’t, any late or missed repayments could mean you’re moved to a repayment plan with higher interest rates.
What are the benefits of poor credit catalogues?
Access to credit
One of the biggest benefits of credit catalogues for bad credit is that they give people the opportunity to make emergency purchases and borrow money to pay for goods that they may not have been able to access via other means.
A large proportion of the UK population have poor credit reports that aren’t good enough to give them access to credit from banks and other lenders, making bad credit catalogue shopping a vital provider of credit for those who need it.
Build credit score
Bad credit catalogues give those with poor credit history the chance to improve it. By making regular repayments and paying off your balance in full, you can prove you’re a reliable borrower.
Improving your credit report can help you get accepted for other credit products, such as credit cards, loans, and eventually mortgages.
Failing to make payments on time, or missing them completely, may harm your credit score, so it’s important to keep up with your repayment plan.
Spread the costs
Making large, one-off payments can be financially difficult for many people, especially if they haven’t budgeted for it. Low credit catalogues allow you to spread the cost of items over weeks or months.
Although this doesn’t reduce the total cost of the item, paying it off in instalments can make it more affordable, giving people access to important essentials they may need.
What are the disadvantages of bad credit catalogues?
Minimum spend required
Many shopping catalogues may only offer credit payment options if your purchase costs over a specific price. This price is usually around £150.
This may cause shoppers to feel more tempted to overspend on items that may not be within their budget.
Large interest rate
Shopping catalogues charge high-interest rates that are higher than other credit providers. This can significantly increase the total amount you have to pay back and means you’ll be in debt for longer.
If your repayments aren’t large enough to cover the additional interest, you can also fall into continuous debt. This is where your repayments won’t cover the interest you’re being charged, leading to a never-ending repayment plan. You’ll likely be asked to increase your repayment instalments if this happens to you.
Pay more than what was borrowed
Due to the interest, you’ll be charged on top of the purchases you make when using a shopping catalogue designed for people with a bad credit rating. You’ll likely have to repay a lot more than the original cost of the item you bought.
Unless you fully pay back the amount you owe within your interest-free period (which not every poor credit catalogue offers) you’ll be charged interest that will compound and grow with every passing instalment period.
This means the amount you owe will grow, and it’s not uncommon for the amount you originally borrowed to double compared to the original amount you borrowed, so it’s really important you consider this before choosing to use a shopping catalogue.
Are there any alternatives to using a bad credit catalogue?
Many people use bad credit catalogues to improve their credit score because making repayments on time demonstrates to lenders that you’re a reliable borrower. If you’re trying to build your credit rating, there are alternatives, such as Credit Builder Cards.
These are credit cards you can get with bad credit scores, and by paying bills off in time and in full, you’ll be able to improve your credit score. They charge high rates of interest and credit limits tend to be low. Still, their average APR is slightly lower than bad credit catalogues, ranging between 25-35% APR. You may also have to pay an annual fee for a credit builder card.
Catalogues for bad credit FAQs
Will using a catalogue help build my credit score?
By using and managing catalogue credit well, there’s potential to improve your credit score. Using catalogues alone will not turn your credit score from a poor one to an excellent one, but it can help to build your overall credit rating and improve your report.
By borrowing less than your credit limit and paying back what you owe on time and in full, you’ll be able to demonstrate that you’re a reliable borrower, which will help to improve your credit score.
Remember, if you miss repayments or are late paying, there’s a high chance that this will have a negative impact on your credit report.
What happens if I miss a payment?
If you’re within an interest-free period and miss a payment, you’ll likely have interest applied to your agreement, and it may even be higher than the advertised APR.
You’ll also likely have to pay a late payment fee and will do so every time you miss a payment.
Late payments can also harm your credit report. Having multiple missed payments can lead to your account defaulting, which can also be bad news for your credit report, meaning it may be difficult to get accepted for credit in the future.
Do I have to pay interest when using a bad credit catalogue?
You’ll likely have to pay interest when using bad credit catalogues. The only way to avoid interest is to pay off what you owe in full before your interest-free period expires.
Any outstanding balance you have after this date will have interest charged to it, and this will grow and compound over time, contributing to an increased amount you have to repay.
Some poor credit catalogues may also charge interest from the moment you make your first purchase, depending on how bad your credit history is.
The average catalogue will charge an interest rate of 39.9% APR. This figure includes the interest and other fees that you’ll have to pay when you take out credit with bad credit catalogues, so overall shopping catalogues are a very expensive form of credit, and you should think carefully about using them.