Credit cards for bad credit ratings: using them to rebuild your credit score

If you have been refused a loan or credit card due to a low credit score, your immediate priority should be improving your credit score. Apart from clearing off old debt, taking on new credit card can be a good thing!

Taking more credit and running it well facilitates positive points to your credit history as it demonstrates your behaviour towards managing credit. An effective way to do this is to sign up for a new credit card and keep up with the repayments. The question now would be:

Could I get a credit card if I have a bad credit rating? Yes! There are credit card companies in market which specialise in credit cards for individuals with bad credit ratings such as the vanquis visa card and the capitalone credit rebuilder card. However, these cards do charge an APR of near 29% with substantial charges for cash advances and exceeding credit limits. They may also be extra checks involved around your personal details and income. Although costly, they do help in rebuilding/improving your credit rating.

How do bad credit credit cards actually help? Credit cards, although secondary to debt, provide a significant insight into how you manage your finances as they mainly as a means for daily purchasing. Missing or defaulting on credit card balance repayments has a negative effect on your credit score and as a result, your credit card balance repayment behaviour hence has a substantial influence on your credit rating. Getting a new credit card with a “fresh start” and diligently making the monthly minimum (or more) repayments demonstrates well managed credit and improves your credit score by adding positive points.

Is there a cheaper way to run a bad credit credit card? As explained above, credit cards for bad credit can be expensive to run but the best way to fully utilise its benefits is to use it for small purchase amounts of up to £40 and repaying the full balance every month. As there is usually a 30 day interest free purchase period on credit cards, your purchase(s) will be more or less interest free and your monthly full balance repayments will have the maximum benefit on rebuilding your credit score. Win Win situation!