Best credit builder credit cards in the UK | rates starting from 28.9% (2024)

If you have poor credit, you’re likely to find it harder to borrow money, whether that’s through a mortgage, personal loan or a credit card. The reason for this is that lenders use your credit score to determine how reliable you are as a borrower. If your credit score is poor, it suggests that you’ve had problems repaying debt in the past, meaning that lenders might be reluctant to offer you credit again.

The good news is that there’s a whole market dedicated to credit cards for those with less-than-perfect credit records. This guide explains how they work, what to watch out for and to compare current credit builder cards on the market

What is a credit builder card?

A credit builder card is a credit card that’s specifically designed for people whose credit score is low or average, either because they haven’t managed their finances well in the past or because they don’t have much of a credit history

If you’ve never borrowed before, there won’t be much on your credit file, which can make it difficult for lenders to determine your creditworthiness. This means they might be more reluctant to offer you credit or, if they do, you might be offered higher rates.

In this situation, a credit builder credit card will help you to build a credit history from scratch.

Credit builder credit cards typically have a more lenient eligibility criteria, making them easier to get accepted for. But because of this, they often have lower credit limits and higher interest rates so that providers reduce their risk. Like all credit cards, they need to be used with care.

Some card issuers like Vanquis and Aqua specialise in credit builder cards, and offer a whole range of cards for this market, while the big household names like Barclaycard or Tesco Bank are more likely to have just the one credit builder card in their range.

How are credit builder cards different from other cards?

Credit builder cards work in a similar way to standard credit cards, but with some key differences:

• Higher interest rates. The “APR” (Annual Percentage Rate) on a credit builder card will usually be much higher compared to that of a standard credit card. For example, you might pay around 27% APR compared to 18% APR for a standard card. Keep in mind that the advertised representative APR only has to be offered to 51% of successful applicants – the remaining 49% could be offered a higher rate.
• Lower credit limits. Because lenders think there’s a risk you won’t repay your debt, credit builder cards have lower credit limits compared to standard cards. This is the maximum amount you can spend on your card and it will often be around £100 to £1,000 for a credit builder card. However, if you repay your balance on time each month, your credit limit could rise later down the track.
• Fewer frills. Typically, a credit builder credit card won’t offer much in the way of bonuses or extras. However, you might find that some cards offer a short 0% introductory offer on purchases or balance transfers.
• Tools to help you build your credit. To help you improve your credit rating, your card provider might offer features such as access to your credit report (through companies like Experian), text or email alerts when a payment is due or when you’re close to your limit, or tips to help you boost your credit score faster.

What is the easiest credit card to get with poor credit?

Although credit builder cards can be easier to get accepted for if you have bad credit, all card providers have their own eligibility criteria and you might find that while one lender rejects you, another accepts your application. To help you with your search, it’s crucial to check whether there are any minimum income requirements or any other criteria you need to meet.

The good news is that almost all card issuers now let you check your likelihood of approval before you submit an application – saving you time and protecting your credit score from further harm (full applications involve a “hard” credit search and have a slight negative effect on your score).

What is the easiest credit card to get with poor credit?

Although credit builder cards can be easier to get accepted for if you have bad credit, all card providers have their own eligibility criteria and you might find that while one lender rejects you, another accepts your application. To help you with your search, it’s crucial to check whether there are any minimum income requirements or any other criteria you need to meet.

The good news is that almost all card issuers now let you check your likelihood of approval before you submit an application – saving you time and protecting your credit score from further harm (full applications involve a “hard” credit search and have a slight negative effect on your score).

How should I compare credit builder credit cards?

You should always compare all your options before applying for a credit card. To make sure you’re choosing the right credit builder credit card for you, it’s worth considering the following:

• How much is it going to cost you? If you clear your balance each month (and don’t withdraw cash on your card), the APR won’t matter too much. However, it’s still worth comparing rates carefully in case you can’t afford to pay off your balance in full one month. Also check whether there are any monthly or annual fees.
• Are you eligible? Check any minimum income or other requirements before you apply. The last thing you want to do is apply for a card you won’t qualify for. Rejected applications can make it harder to get accepted for credit in the future. It’s well worth using an “eligibility checker” as this will give you that you can use to get an indication of how likely you are to get approved before applying. And as it runs a “soft credit check”, it won’t affect your credit score.
• Will it help you stay on top of your finances? A good credit builder card should make it easy for you to track and manage your account and manage repayments. That might mean a decent mobile app, text alerts or even visibility of your credit record.
• Are there any perks? Rewards on credit builder credit cards aren’t commonplace, but in some instances, the issuer might include basic benefits such as loyalty points on purchases or fee-free spending overseas. Some providers also include “money saving” benefits, like points that will save you money on your food shop. Just be wary of building up debt through chasing points – you’ll almost certainly end up paying more in interest than you earn in rewards.

Are credit builder credit cards a good idea?

Credit builder credit cards can be a good idea if your aim is to improve your credit score or you’ve struggled to get credit in the past.

You might want to use a credit builder card if:

• You’ve missed credit repayments in the past
• You’ve previously been declared bankrupt (likely because you had too much debt and couldn’t repay it)
• You’ve had a county court judgement (CCJ) against your name (you might have one if someone takes court action against you saying you owe them money and you do not respond)
• You have never borrowed before and so have no credit history

If you apply for a credit builder credit card and use it sensibly, it could be a handy way of helping you to improve your credit score over time. You’ll need to meet all your monthly repayments on time and stay within your credit limit. After 6 to 12 months you could see improvement in your credit score.

Pros and cons of credit builder credit cards

What should I watch out for?

If you want to take out a credit builder card, it’s important to keep the following points in mind:

• Never miss your minimum repayments. This will result in additional fees and damage your credit score even further. To help you remember, set up a direct debit to (ideally) pay off the full amount each month.
• Avoid withdrawing cash. Cash withdrawals on any credit card are expensive. As well as being charged a fee, you’ll also pay a higher rate of interest – plus this will be charged from the moment you get your money, even if you pay off your balance in full that month.
• If you are rejected for a card, wait before applying again. Every time you apply for credit, it shows up on your credit file. Too many applications in a short space of time can make you look desperate for credit and lenders might be put off. Then wait at least 3 to 6 months before applying for another card.

How else can I improve my credit score?

There are a number of other steps you can take to improve your credit score. For example:

• Check you’re registered on the electoral roll. This helps lenders confirm your address.
• Pay bills on time. Keeping up to date with all bills will show lenders you can manage your finances.
• Consider a credit building tool like Loqbox. You can find out more about how this works here.
• Check your credit report for mistakes. If you spot any, contact the credit reference agency and get them corrected.
• Try to avoid changing jobs too often. Lenders prefer stability.

You can read our full guide on how to improve your credit score.

Frequently asked questions

• Lenders will look at a range of factors including your income and your credit history to assess whether you’ve been a responsible borrower in the past and repaid debt on time. They will look at the information provided by UK credit reference agencies, such as Experian, which will include court records, electoral rolls and account data from banks and utility companies.

• That depends. If you’re worried leaving unused accounts open might encourage you to go on a spending spree, it might be best to close them. It can also help to reduce the risk of fraud.

  However, in some cases, closing accounts can have a negative effect on your credit score. That’s because your overall credit utilisation might increase. This is the amount of available credit you’ve used. So if your total available credit was £2,000 and you used £1,000 of it, your credit utilisation would be 50%. If you closed an account and this reduced your available credit to £1,500, your credit utilisation ratio would increase to 75%. Having a high credit utilisation can have a negative effect on your credit rating. It’s best to keep it below 30%, or at least below 50%.

  Some credit cards charge a dormancy fee. Make sure you check your card’s T&Cs.

• Your bank or building society can be a good place to start. Having an existing relationship with your bank can help increase your chances of acceptance, but don’t assume loyalty will automatically pay. Always shop around and compare what’s on offer. There are many independent credit card companies that might offer a better deal than your existing bank.

• The minimum repayment is the minimum amount you are required to pay towards your outstanding credit card balance every month to avoid additional fees. However, if you only pay off this amount you will still be charged interest on the remaining balance (unless you have a 0% deal). Minimum repayments are often set at low levels, so it’s best to pay off more than this if you can each month. That way, you’ll pay less interest and clear your debt faster.

• If you miss a repayment, a late payment fee will apply. It can also have a negative impact on your credit rating and if you’ve taken advantage of benefits such as a 0% offer, this can also be revoked. If you’re worried about missing a repayment, contact your card provider as soon as possible.

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