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If your credit score isn’t so great, a credit building credit cards can be a good way of building it up. Or if you’ve never had a credit card and have no history of borrowing, then this type of entry-level card could be for you.

What is a credit building credit cards?

As with all credit cards, a credit builder card has a maximum spend limit. However, the limit is typically lower than most other cards – usually £100 to £1,500. Depending on the terms and conditions set out in your card agreement, your limit could be increased as you prove you can spend responsibly, but this depends on how you manage your account.

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Can you improve your credit record with a credit card?

Yes, if you use a credit card carefully over several months you could improve your credit record. Paying back what you borrow on time looks good to financial companies even if you have had problems with debt in the past. They could then give you a better credit score when they look into your finances.

This will make it easier for you to get accepted for financial products like credit cards, mortgages and loans, and make sure you are able to get the best ones on the market.

What are credit building credit cards?

Credit building credit cards, sometimes known as bad credit credit cards, are just like any other credit card, but these credit cards are more likely to approve your application even if you have a low credit score or have a missed payment or two in your credit history.

By using a credit building credit card, someone with a limited or poor credit history, can rebuild his or her credit score.

In creating a positive history of financial repayments on your new credit building credit card, your credit score is likely to improve and give you a better chance of being approved for other credit products in the future.

Why would someone need a credit building credit card?

A low or bad credit score can be the result of a number of factors, some of which can be quite surprising, and others, which are not a surprise at all:

  • Not having a history of credit. It may seem counter intuitive, but if you’ve never had a credit card, loan, or never even paid off any utility bills at home, your credit score is likely to be quite low. This is because lenders want to see a history of repayments to know they can trust you with paying back their money.
  • Not paying your bills on time. Unsurprisingly, if you miss a payment or fail to pay your bills on time, be it a credit card or even a mobile phone bill, it will show up on your credit report, which all lenders can see.
  • Not having your name on the electoral register. Signing up for the electoral register in your area is a signal to lenders that you are less likely to commit fraud, as your address and your name are linked together.
  • CCJs or bankruptcy. County Court Judgments (CCJs) and/or being made bankrupt in the past will significantly reduce your chances of being able to obtain credit again.

A credit building credit card can help obtain credit when it would normally seem less likely. But before you even compare credit building credit cards, it’s important to look at what you can do to begin improving your credit score.

How to improve your credit rating

It’s worth looking at your finances and assessing how much you need to borrow to get by, and more importantly, how much you can afford to pay back each month.

The more you can pay back each month, the better. Ideally, if you can pay back the full amount each month on your credit card then you can avoid paying the interest on your lending. This will also help improve your credit score.

If you are unable to meet your repayments a credit card can be a risky proposition, but if you need to borrow you may be better off with a low APR credit card.

If you are on the electoral register then the address you’re registered to vote at will match up with your credit card billing address, and this will help your chances of being approved for a credit card application.

If you haven’t got any history of repayments, then it might be worth putting your name on some utility bills at home and paying them in your name. This will show up on your credit report and demonstrate to lenders that you have a history of repayments.

What are the pros and cons of a credit building card?

If you’ve been rejected for credit before, then a credit building card might be the only card option available to you.

But this type of card is also good if you’ve never had credit before. Because of the low spend limit, they’re a good way of easing into credit card usage as you can’t rack up thousands of pounds worth of debt over a short period.

However, the low spend limit is also a disadvantage, as are the high interest rates that usually come with a credit building card. Nevertheless, if you manage your account and pay back each month in full, then you won’t face interest rates and you could see your spend limit gradually increased.

Who do we include in this comparison?

We include unsecured loans you can get in the UK from our panel. Like other comparison sites, we make money when you click through to a product or service, or go on to purchase it after visiting our site. If you use one of our broker services, we make commission after you buy a product, but it doesn’t cost you anything extra. Our comparisons are free for you to use and you get the same or a better deal than going direct.