Understanding Credit Building Credit Cards
What is a Credit Building Credit Card?
Credit building, or bad credit, credit cards are designed for those who have a poor credit rating or have a limited credit history. By keeping up to date on your payments with a credit builder car, you will then have a much better chance of being accepted for other credit cards, mortgages and loans. Take a look at our guide your options when it comes to building your credit history.
Is a Credit Building Credit Card right for me?
If you're looking for your first ever credit card, or think there could be things in your credit history that may stop you getting a top deal then consider a credit building card. Why not try our Card Matcher Tool - it's free and can match you with cards that meet your needs.
If you want the benefits of a credit card but don't wish to take out more credit, then take a look at our prepaid cards.
Credit Card Providers with cards for low credit scores
There are a few providers who offer specialised credit cards to help build your credit history, some are Aqua, Capital One, Vanquis and Barclaycard.
What type of Credit Profile is required for a credit building card?
These credit building cards, sometimes called low credit score or adverse credit cards, are designed for those who have a poor credit history - either through a lack of experience in dealing with credit or having had issues with debt in the past. We have a specific guide to getting a credit card with poor credit.
How can I improve my credit score?
Customers who haven’t been exposed to much credit will have what is known as a ‘thin’ file. This basically means that as there isn’t a great deal of history on how you handle credit, lenders may have reservations about offering you market leading products. In this case the best option would be to try and use a credit building product, such as a credit card designed for customers with a low credit score. If you can use the card in a sensible way in the eyes of the issuer, always making sure you make the required payments on time for example, this will improve your profile and give you a better chance of being accepted for further credit in the future. Have a look at our info on applying for a credit card for the first time.
Customers who have had difficulties with credit in the past could look for a credit building card. If you use this sensibly and ensure you manage the account well – making payments on time and staying within your credit limit will give you a better chance of being accepted for further credit, on a wider range of products, in the future.
Glossary of key credit building terms
Adverse credit
This term is used to descibe people with a poor credit history. A poor credit history can include previous laon or mortgage arrears, CCJ's or bankruptcy.
Authorised user
An authorised user is issued their own credit card and has full charging privileges on the main cardholders account but they are not responsible for the repayment of the account balance.
Annual Fee
This is a yearly fee charged simply for having a credit card issued in your name. It used to be justified as an “administration” charge. These days, few credit card companies charge such a fee, so your aim is to avoid paying one!.
Cash advances
You obtain a cash advance by using your credit card to draw cash. Cash advances will invariably attract interest from the moment they are made, so there is no “interest free” period of grace.
Credit Limit
This is the maximum amount that your credit card company will allow as credit i.e. a limit that cannot be exceeded as the balance owing on your credit card.
Credit Rating
A scoring system is used by lenders to determine how credit worthy each customer is.
Credit Card Late fee
If you do miss a payment or fail to pay the minimum amount then you will be charged a late fee by your card provider - typically this is £12 and is added to your balance.
Joint Account Holder
Unlike an authorised user a Joint Account Holder has the same bortrowing priviledges as the main account holder but they too will be responsible for the repayment of the account balance.
Representative APR
This is the most fundamental of all the terms describing your credit card. APR stands for Annual Percentage Rate and is the effective rate of interest, over the year, which reflects all the costs of the credit card, including interest charges and other fees (such as an initial arrangement fee and any annual charge). It is 'representative' as 51% of those accepted for the card have to be offered the advertised APR.
Representative Example
New regulations that came into force on the 1st February 2011 now mean that every credit card advertisement has to include a representative example of the total cost of the credit. The example includes all the required 'standard information'that includes the representative APR, an example credit limit and the rate of interest on purchases after any introductory period has expired.
Statement
A monthly credit card bill which shows what you have spent on your card during the previous month. It also shows, what you owe, the minimum repayment due and the latest date you can make the payment.
Statement Date
This is the effective date of the statement you will receive from your credit card company summarising all the activity on your account – purchases, payments, credits, charges, any other transactions and the monthly outstanding balance.
Withdrawal Limit
This relates to cash advances and is the maximum you can withdraw, either at a cash machine or over the counter at a bank, in any single day.