Compare Credit Builder Credit Cards

If you have no or poor credit history, choosing a credit builder credit card could be just the thing to boost your rating.

Compare credit builder credit cards

Coronavirus Update: Credit card providers may have temporarily stopped offering credit cards to customers due to the current Coronavirus (COVID-19) pandemic. This may result in a limited choice available to you.

Last updated February 2021

What is a credit builder credit card?

A credit builder credit card is designed for those with no or poor credit history. Credit-building credit cards are also sometimes referred to as ‘bad credit’ credit cards. They can help you build your credit score over time, opening up better opportunities in the future.

With so much resting on your credit rating, having poor credit can make it harder to get approved for things like mortgages or car finance. Those with poor credit always end up paying more to take out loans which only continues the cycle. A credit builder credit card is a good way to start taking back control over your credit history.

How do credit-building credit cards work?

If you have poor or no credit history, that doesn’t mean you can’t get a credit card. There are options out there for you. However, bear in mind that credit cards for those with bad credit will have certain limitations.

Credit-building cards will typically have low credit limits and higher interest rates attached. This may not be ideal, but if you can commit to using the card well, you will see your credit score start to climb up.

How to use a credit card to build credit

Using the credit card doesn’t necessarily result in high-interest payments - providing you pay the balance in full each month. If you can do this every month for a long time, this will greatly affect your credit score.

With a history of paying your balances in full and on time, lenders in the future will look more favourably on you. Over time, you will be able to access higher credit limits with lower interest rates for credit cards, loans and mortgages.

Did you know: There are other ways you can help boost your credit score, such as fixing simple mistakes on your credit report or getting on the electoral register. Before you apply for more credit, take a look at these 10 easy steps to help improve your credit score.

Advantages of a credit builder credit card

The main reason to get a credit builder card is to build up your credit history over time. Many people make the mistake of avoiding any credit if they have had issues in the past, but this doesn’t help you build a positive credit history.

Some other advantages of credit-builder credit cards include:

  • Low credit limits - While it may sound like a problem, a lower credit limit can help you keep your spending under control - especially if you’ve previously struggled with impulse purchases in the past.
  • You are more likely to be accepted - Finding a credit card that is designed for those with poor credit means you’re more likely to be accepted.

Disadvantages of a credit builder credit card

Naturally, there are some downsides to this type of credit card. This type of credit card has certain limitations as banks view those with no or poor credit as a greater risk.

The main disadvantages of a credit-builder credit card are listed below:

  • Low credit limit - This can be seen as both a positive or a negative. Some may find the low credit limit too limiting for larger purchases.
  • Higher interest rates - As lenders see you as a greater risk, credit cards and loans usually have higher interest rates for those with poor credit. This can be avoided if you pay in full each month.
  • The risk of building more debt - While a new credit card can definitely help, it depends on how you use it. There’s always the risk of building up more unmanageable debt, which will make your credit rating worse.

Credit builder credit card FAQs

We have listed out some frequently asked credit building credit card questions.

Credit-builder credit cards act in the same way as regular credit cards. The main difference is that there are stricter limitations. This means you may only be able to get a card with up to a £500 or £1,000 credit limit. High-interest rates may also apply, and you might not be able to get a card with features such as 0% balance transfers.

If you are worried about being accepted, credit-builder credit cards are designed for those with poor credit. If you are worried about being accepted, credit-builder credit cards are designed for those with poor credit. While there's no guarantee that you will be accepted, these cards' eligibility criteria will typically be more lenient.

If you get rejected for a credit card, the best thing to do is avoid applying for too many new cards. Credit card rejections can damage your credit record. The next time you apply, make sure you do thorough research on the eligibility criteria before applying.

If you have never taken out credit before, this means you will have no credit record. This means that lenders have no way of knowing whether you will make repayments on time. For that reason, credit-builder credit cards are ideal. Putting a regular monthly expense on your credit card and paying it off straight away is a simple step towards building a good credit history.

Not sure what your score is? Credit Karma allows you to check your credit report for free.

Yes, providing you meet the repayment terms of the card provider. Paying off credit card debt on time without missing payments will positively affect your credit score.

No, you can not get a credit builder credit card without having a credit check. Credit checks give card providers access to your financial history so they can decide whether to accept or decline your application.

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