About credit building credit cards
If you don’t have sufficient credit history, either because you’ve never had a loan or any other type of credit or because you’re new to the UK, a credit building credit card might be right for you.
They can also help if you have a bad credit history.
If used responsibly, these cards can be good for improving your credit score, which can be important as it helps lenders assess whether they’re willing to lend to you.
Having a good credit score can help you to apply for loans or credit cards with lower interest rates and special benefits, like interest-free periods and cashback. This could help save you money in the long term.
How do credit building cards work?
Your credit score is one of the things prospective lenders look at to decide whether to offer you credit.
A good credit score can increase your chances of getting approved for loans and credit cards with lower interest rates. Credit building cards can help you improve your credit profile if you have a bad credit score or no credit history at all.
By using a credit building card and meeting your monthly repayments, paying bills on time and not exceeding your credit limit, your credit score can steadily improve over time as you demonstrate your financial responsibleness.
How can I get a credit building card?
To get a credit building card, you first need to apply.
You could be eligible to apply for the Vanquis Credit Builder Credit card if you:
- Are over 18
- Live in the UK
- Do not already have an Aquis, Chrome, Origin, Vanquis, Thimbl or Granite Credit Card
- Are not currently bankrupt or have an active Individual Voluntary Agreement (IVA)
To apply, start by completing our online form.
After you’ve filled in your initial details, we’ll perform a soft eligibility check that gives you an idea of the credit limit, interest rate and minimum monthly repayment you could expect if you’re eligible.
If approved, you’ll receive your card in the post. Once you’ve got this, you can download the Vanquis app and get started on your credit journey.
How to use a credit building card?
Using your card can be straightforward. But to get the most out of it, there are a few things worth remembering:
- Make your payments on time
It’s critical that credit holders don’t have any late or missed payments, as this may negatively impact your overall credit score. Don’t worry, setting up an automatic payment instruction, like a Direct Debit or Standing Order, can help make sure you never miss a payment.
- Pay more than the minimum amount
If you can afford to, it might be a good idea to pay more than just the minimum amount on your balance each month. That’s because the more you can pay off each month, the less you’ll need to pay in interest. It may also help to pay off your full statement balance every month, if this is affordable.
- Charges for withdrawing cash or using your card abroad
Credit building cards aren’t designed for making cash withdrawals. Doing so could see you charged at a higher interest rate or facing an extra fee. The same might also apply when using your card abroad. For this reason, we strongly recommend that you read all the terms and conditions of your card before using it.
The benefits of credit building cards
There are many advantages to using a credit building card, including:
- They can help build your credit score: With proper financial practice, like meeting your minimum payments and keeping on top of your spending, your credit score can improve over time. This comes as you gradually demonstrate to creditors that you’re financially responsible.
- More financing options: As you build your credit using a credit building card, the amount you pay in interest can decrease over time. The amount you can access can increase, too, giving you more options for accessing credit in the future.
- Lower credit requirements: Unlike traditional credit cards, credit building cards have lower acceptance requirements because of the increased APR and lower credit limits. This means that even people with a bad credit score can access credit and possibly rebuild their score with good practice.
The disadvantages of credit building cards
- Higher Interest Rates and Fees: Credit building cards often come with higher interest rates and fees compared with traditional credit cards. This can make carrying a credit balance expensive, especially for users who struggle to manage their credit.
- Lower Credit Limits: Initially, credit building cards may have lower credit limits compared to other types of credit cards. However, this is often just a starting point and can be improved over time with good credit management.
- Impact on Credit Score: While credit building cards are designed to help improve credit scores over time, missing payments or relying too heavily on your credit balance without managing repayments could have a further negative impact on your credit score.
The importance of building credit
Your credit score is what banks use to determine how good you are with money. They then use this to calculate how likely you are to pay back any money borrowed and, therefore, how much you’ll be able to borrow.
This means having a good credit score is critical when it comes to being granted major loans, including mortgages and car loans, while also improving your likelihood of being approved for services that require on-going payments, like phone contracts and internet plans.
Having a good credit score can make it easier to access additional credit options, like higher credit limits for larger purchases, better financing options for things like car leasing and phone plans, and better APR on future cards and loans, as long as you manage your repayments well.
Can credit building cards improve your credit score?
Credit building cards are designed to help you improve your credit rating. The important thing to remember is that you must repay at least the minimum amount each month and avoid missing a payment or going over your credit limit. If you do miss a payment, pay late or go over your limit, this could damage your credit score.
Some credit building cards are offered to people with a bad credit history. These cards usually have lower credit limits and higher interest rates.
However, this can help you build your credit score long-term and avoid getting into further financial trouble. As long as you repay the full statement balance on time each month, on or before your statement due date, you wouldn’t need to pay any interest on your purchases.
Can I get a credit building card if I have bad credit?
There is no guarantee of being accepted for a credit card. But if you have bad credit, not enough credit history or you’re new to the UK, a credit building credit card could help you.
If you’ve previously been discharged from a bankruptcy, you might also be able to rebuild your credit score using one of these cards.
If any of these situations apply to you, you may have a better chance of getting a credit building credit card than a standard one.
However, it might be best to check your eligibility before applying for any credit card. At Vanquis, we’ll help you check whether you’re eligible for one of our credit building cards online.
Our simple process takes around 60 seconds, and helps you find out whether you’re likely to qualify for a Vanquis card before you commit. View our credit card offering and check your eligibility today.
FAQs
What is a bad credit score?
Each credit reference agency, bank and provider will have different metrics for gauging what is a good or bad credit score. For example, TransUnion scores people out of 710, whereas Experian scores people out of 999.
When it comes to Experian, poor scores range between 561 and 720, whereas any credit rating between 0-560 is considered an extremely poor score. Experian scores of 721-880 are considered ‘good’, 881-960 ‘very good’. Anything above 961 is considered ‘excellent’.
TransUnion credit scores range between 0-710, with any score below 565 labelled ‘needs work’. Scores of 566-603 are considered ‘OK’, and anything over 604 is considered ‘good’. The best TransUnion scores are 628-710, which are considered ‘excellent’.
Equifax credit scores range from 0-1000, with scores below 438 considered ‘very poor’. Scores from 439-530 are considered ‘poor’, 531-670 ‘good’, 671-810 ‘very good’, and anything over 811 is considered ‘excellent’.
If you’re worried about your credit score, a credit building card can help get things back on track when used correctly.
(Accurate as of October 2024)
Could using a credit card make my credit record worse?
Yes, using any credit card, including credit building cards, comes with the risk of damaging your credit score if you can’t keep up with repayments or go over your credit limit.
It's important to stay on top of your repayments to make sure you don’t damage your credit score and only use credit when you can afford to pay it back.
How can I check my credit score?
You can check your credit score any time using a reputable online credit reference agency, like Experian, and even most banks. Repeated hard credit checks can damage your credit score over time, so make sure the tools you’re using are conducting soft checks where possible.
Vanquis’ soft eligibility checker can help you find out if you’re eligible for a credit building card, as well as what credit limit you could be offered and what rate of interest is applied.
