Every adult has a credit history, which records how well they’ve managed credit (such as loans, store cards, or credit cards) in the past. Lenders use this record when you apply for credit to determine if you’re a good risk to lend to. Mistakes such as paying late, missing payments, past bankruptcies, defaults, and CCJs can make you appear high-risk to lenders, resulting in credit rejections.
However, there are special credit cards designed for those with poor credit histories. These cards can be a financial lifeline and can help improve creditworthiness if managed correctly.
How to Raise Your Credit Score Using a Credit Card
Using a credit card responsibly can improve your credit score. Follow these rules to see a positive change in your credit record:
- Use Your Credit Card for Small Everyday Spending: Use your credit card for planned spending instead of cash or debit cards, but keep the usage below 30% of your credit limit. This shows that you’re not reliant on borrowing.
- Repay in Full Each Month: Pay off the full balance each month to avoid interest charges and to show lenders you can manage your credit responsibly.
- If You Can’t Repay in Full, Always Repay at Least the Minimum: Ensure at least the minimum repayment is made on time to avoid late fees and negative markers on your credit report. Setting up a direct debit can help ensure payments are made on time.
How to Apply for a Credit Card for Bad Credit
There is no single top-pick card to rebuild credit as any credit card can improve your rating if managed correctly. Use an existing card if you have one, or use a Credit Card Eligibility Calculator to see which new cards you are likely to be accepted for. This prevents multiple hard searches on your credit report, which can negatively impact your credit rating.
Steps to Apply for a Credit Card for Bad Credit:
- Check Your Credit Reports for Errors: Ensure there are no mistakes on your credit report that could negatively affect your rating.
- Use a Credit Card Eligibility Calculator: This tool performs a ‘soft search’ to show your chances of acceptance without affecting your credit score.
- Apply for the Card with the Best Perks for You: Look for cards with benefits like 0% interest on spending, cashback, or reward points.
What Can I Do if My Credit Card Application Has Been Declined?
If your credit card application is declined, it’s likely due to a poor credit rating. To avoid further damage to your credit rating, consider the following options:
- Wait Until Your Bad Credit History is Less Recent: Time can heal credit history; check your reports regularly for improvements.
- Try a ‘Credit-Builder’ Product: Products like Loqbox can help improve your credit history by showing regular savings and repayments on your credit report.
How Do I Check My Credit Score?
Regularly checking your credit reports from the three main credit reference agencies (Equifax, Experian, and TransUnion) is crucial. Use free tools like MSE Credit Club, Clearscore, and Credit Karma to monitor changes in your credit score.
Bad Credit Credit Cards FAQs
What Are the Easiest Cards to Get?
Cards designed for those with poor credit histories are usually easier to get. These cards often have higher interest rates and lower credit limits but can be a stepping stone to better credit.
Can You Get a Card with Very Poor Credit?
Yes, but the options may be limited. Specialized credit-builder cards and secured credit cards can be a good starting point.
Why is the Interest Rate Higher than the Advertised Rate?
Advertised rates are typically for those with good credit. With bad credit, you may be offered a higher interest rate due to the increased risk you present to lenders.
Conclusion
By tending to your credit history and using a credit card responsibly, you can turn a tough situation into an opportunity to improve your financial health. By following the steps to boost your credit score and selecting the right card for your needs, you can rebuild your financial credibility and open doors to better credit opportunities in the future.
Remember to regularly monitor your credit score and be aware of the options available to you, even with a negative credit history. With time and effort, it’s possible to overcome financial hurdles and achieve stability and financial success.
