Credit building cards

People with bad credit scores are often excluded from taking out standard issue credit cards, the primary reason for which being that they are seen as unreliable borrowers. Thanks to so-called credit building cards, however, you can still pay with plastic even with a sketchy rating - all the while getting your score back on track with regular, on-time payments.

When does a credit building card become an option?

If your credit score is unblemished then you're better off opting for a standard credit card - as the interest payments will be lower.

Credit building cards are there to help people with bad credit rebuild their ratings, so are primarily aimed at the following groups:

Those who are currently in or have struggled with debt
Those recovering from bankruptcy
Those without a history of borrowing (typically people aged 18 to 25 who are beginning to take strides towards financial indepedence for the first time)
Those with county court judgements issued against them

What are the perks of taking out a credit building card?

Unfortunately, there is no quick fix for improving your credit score after getting yourself into financial trouble - so don't expect taking out a credit building card to change your life overnight.

The idea is that you pay all your bills on time and within the agreed terms over a period of several months (and perhaps even years, depending on your starting point) and eventually get back into lenders' good books.

What do I need to be wary of with a credit building card?

Credit building cards are of course not without their downsides. Here are a few things you need to be wary of:

Low borrowing limits. People with poor credit scores are seen as a higher risk by lenders, which means they tend to cap the monthly borrowing limit to three figures - which could be a problem depending on the level of your expenses.
High APR. Inevitably, credit building cards charge higher levels of interest than normal credit cards. This can be tricky for those who are trying to get their finances back on track as they're having to shell out hefty fees every month on top of whatever they borrow.
Missed payments have a bigger impact. To some degree you're walking a tightrope with a credit building card, in that if you do a miss a payment your credit score could take an even bigger dent.

Which credit building cards should I apply for?

As with any credit card it's always important to shop around before you sign on the dotted line, both to find the best APR and borrowing terms and ensure the totality of the service being offered - customer support, online banking, et al - suits all of your needs.

Make sure you don't apply for loads of credit building cards at once though. Each time you put an application through - whether online, over the phone or in-person - the lender performs a "hard check" on you which damages your credit score. Instead, use a "soft check" tool to assess your eligibility for each card.

Here are some current UK cards worth checking out:

Barclaycard Forward Credit Card

APR of 33.9% is reasonably generous by credit building car standards
Minimum credit limit of £50 gives you flexibility in months where you don't plan on spending much
Maximum credit limit of £1200 is handy if you're hit with unexpected bills

Fluid Credit Card

APR of 29.9% is one of the lowest available on UK market at the moment
Maximimum credit limit of £2500 is way above limit offered by competitors (though lack of strict controls on spending could be an issue for those with debt issues)
Flexible payment dates allows you to plan around payroll and other monthly outgoings

Vanquis Bank Ltd Classic Credit Card

APR of 39.9%, is towards the higher end, but not too extreme
Minimum spend of £150 is a higher threshold than some cards impose
Maximum spend of £1000 gives you a little bit of leeway, though more generous limits are available