Credit Card options for those with a poor credit history

• Guides
• Published: 16 Oct 2008 in Money and Credit Cards

It might surprise you to discover how relatively easy it is to acquire a poor credit history and the poor credit rating that goes with it. Before we take a brief look at the credit card options for those with a poor credit history, therefore, let’s consider some of the things that might have given you a bad credit rating in the first place:

• It’s not just a question of failing to pay your domestic, credit card, rent or borrowing – it could be a question of failing to pay them on time;
• Did you know that failing to be on the Electoral Register can gain you adverse credit rating points? Make sure that you’re on the Electoral Roll (by registering) before you make an application for credit;
• Even your post code can attract a bad credit rating, if the house it identifies has a history of other people at the same address who have a bad credit rating;
• Unsurprisingly, a County Court Judgment (CCJ) against you will adversely affect your credit rating.

You’re certainly not going to be alone in having a poor credit rating. The simple fact is that many people in today’s world will have unwittingly, or otherwise, allowed a temporary mismanagement of their personal finances and acquired a poor credit history. If the current forecasts are true, and we’re on the eve of a major slowing down of the western economies, then even more people could find themselves with an adverse credit rating.

Despite these trends, a credit card remains an almost essential facility for everyone these days, including those with a poor credit history. In response to this demand, therefore, there are companies that specialise in the issue of “bad credit credit cards” for people who have been turned down for a standard card.

The sting, of course, is that past problems with managing personal finances makes it more expensive to obtain credit in the shape of a credit card in the future. Those with a poor credit history, therefore, are likely to face a set-up fee to obtain a credit card. In addition, although many other cards are issued without having to pay an annual fee, the “bad credit” credit card is almost certainly going to attract an annual fee. To cap it all, the card issued to anyone with a poor credit history is going to attract a higher rate of interest on outstanding debit balances. This reflects the fact that the credit card provider is making the not unreasonable assessment that someone with a poor credit history poses a greater financial risk – and an attempt is made to mitigate that risk of financial loss by imposing higher charges all round.

It’s worth keeping to the forefront of your mind, however, that if you repay any credit purchases on the card before they fall due, you can avoid interest charges altogether.

This may all sound a bit negative, but taking out a credit card aimed at people who have experienced financial difficulty in the past can actually help rebuild your credit card rating. Simply

• meet your monthly commitments on time
• try not to run up other debt anywhere else (ie show that you are managing financially)

Once you have shown that you are no longer such a poor credit risk, then you should be offered a regular credit card, with lower rates of interest and perhaps no annual fee, sometime in the future. Conversely, of course, if you again default on such payments, your credit rating will dip still further.