Credit Cards for Bad Credit UK

Credit cards for bad credit are simply credit cards which are available even if you have a poor or bad credit history. Getting approved for a credit card when you have a poor credit history is rarely a straightforward process, but recent financial times have seen more financial institutions launch these bad credit cards that continue to gain popularity in the UK.

Although, in theory, anyone can apply for a bad credit card, they are designed for people whose past behaviour (or lack thereof), has demonstrated that they are more likely than others to default on moneys borrowed.

What Is Bad Credit?

The term bad credit is used to refer to a less than perfect credit history. Usually, having bad credit results from being late or defaulting on some payments –– and as a result, considered by potential credit providers as being somewhat higher risk.

However, if you haven’t taken up credit before or are still new to credit altogether, you may also fall under the description of bad credit as you haven’t had the chance to prove your creditworthiness.

If you’ve been rejected by lenders in the past, it’s easy to assume you have a bad credit history. Nonetheless, different lenders have varying criteria for approval. So, it’s not uncommon for some lenders to see you more positively than others.

Some of the things that most lenders view negatively include defaults, late payments, Debt Management Plans, County Court Judgments, bankruptcy and Individual Voluntary Arrangements. All these factors are reflected on your credit report, along with other data used to calculate your credit score.

Benefits of Credit Cards for Bad Debt

Despite their higher interest rates, low credit limits and nothing much in the way of benefits, bad credit cards remain popular in the UK, and for good reason.

i) Building and Rebuilding Credit History

If you’ve never previously had debt, which makes it difficult to qualify for a standard credit card, bad credit cards give you the opportunity to build a credit history. These cards offer a simple route to demonstrate your suitability for other better credit products.

Bad credit cards are also particularly attractive to people who want to demonstrate their creditworthiness, especially after missing out or making late payments which resulted in a low credit score. Ultimately, making payments on time and in full allows you to access credit at more modest interest rates.

ii) Cash Advances

Although bad credit cards have high-interest charges on cash advances, they’re still considerably lower than those charged on payday loans in the recent past. Also, because they can be paid off early to reduce the cost of borrowing, many people find them to be a cheaper alternative to payday loans and other short-term loans, if and when they’re looking to borrow emergency cash.

iii) Eligibility Checkers

Eligibility checkers are becoming increasingly popular in the bad credit industry. While not all credit issuers offer eligibility checkers, these tools give customers the opportunity to pre-check their likelihood of acceptance without impacting their credit score. Unlike “hard search” credit checks that can have a detrimental effect on your credit score, eligibility checkers use a “soft search” that does not leave a mark on your credit history.

What Credit Limits Are Available On Bad Credit Cards?

Because lenders want to see how you manage credit, the credit limits offered on bad credit cards, at least initially, are lower than those available on standard credit cards. Credit issuers often publish their minimum and maximum credit limits, usually ranging between £100 and £500.

By proving that you can remain within your credit limit and repay at least your minimum monthly payments on time, most lenders will increase your limit or at least review your account after a period of time.

Bottom Line

A bad credit history does not necessarily lock you out of access to credit and/or a stable financial future. Even if you’ve struggled to make prompt payments in the past, bad debt credit cards give you the opportunity to get back on track. Moreover, it’s never too late to start paying attention to your credit score.

Bad credit cards give you the opportunity and flexibility to show a renewed commitment to responsible credit management. Always bear in mind that one of the most effective strategies for effectively managing your credit is keeping your balance as low as possible and making consistent, on-time payments.