Credit cards for building credit

What is a credit builder credit card?

A credit builder credit card is aimed at helping people who need to build up a credit history from scratch or get their credit rating back on track after being refused credit.

Credit builder cards are useful if you’ve found it hard to get a credit card for various reasons, like:

  • Your income or employment status is not strong enough to get the credit card you want.
  • You have a poor credit history and a low credit score.
  • You haven’t had time to build up a credit record yet and there isn’t much for lenders to judge you on, for example if you’re new to the UK, if you’re a first-time card-holder or you’ve just turned 18.

How do credit builder cards work?

Credit builder cards usually have low credit limits and a high APR (Annual Percentage Rate) to start with. This helps lenders reduce the risk of losing money if you can’t pay them back. A high APR means you’ll pay a large amount of interest on outstanding balances, so it’s important to pay off your card in full each month if you can.

With a credit builder card, you may have to do without some of the promotional features you find in other credit cards, such as rewards and a 0% promotional rate on purchases and balance transfers.

How can a credit card build my credit?

At first, taking a credit builder card might briefly cause your credit score to drop. But over time, managing your credit builder card responsibly can help you build a positive credit history.

By meeting your repayments on time and in full, and staying within the credit limit, you can start to look more reliable to companies. As a result, you should see your credit score improve, and you may be able to increase your credit limit.

Just remember that your credit limit, and how much you use of it, can affect your score. It’s usually best to stay under 25% of your limit – for example, if you can borrow £2,000 on your card, try not to use more than £500 at any one time.

Some tips for managing your credit builder card:

  • Paying credit cards off in full every month means you won’t have to pay interest.
  • Avoid late payments, as you may be charged a fee and your credit limit reduced.
  • If you can’t pay the statement in full, make at least the minimum repayment - missing one can seriously affect your future credit applications.
  • Set up a direct debit to make the monthly repayment as it arrives.
  • Get text or email alerts so you won’t forget when the next statement is due.

Do you have to have a credit card to build credit?

No. A credit card is not the only way to build up credit – there are other ways to show lenders that you can manage credit well, such as with a mobile phone contract or household utility bills. The key is to keep making regular payments on time and (if possible) in full. This can show companies that you’re a reliable borrower

How to get a credit builder card?

You’ll need to apply for a credit builder card and get approved. The lender will work out your credit score to help them decide whether to lend to you. They use their own methods and criteria to do this, and usually take into account information on your credit report and application form, as well as any data they hold on you (e.g. if you’re a previous customer).

Of course, credit builder cards are generally designed for people with low scores. But this doesn’t guarantee you’ll be accepted, so you may want to try and improve your score before applying.

Each time you apply for credit, a hard search will be recorded on your credit report. This can temporarily lower your credit score, making it harder to get approved by lenders. So, it’s important to space out your applications over several months, and make as few as possible.

It’s also useful to check your eligibility for a credit builder card before you apply. You can see your eligibility rating when you compare credit cards with us, helping you understand your chances of approval. Comparing with Experian is completely free, and it won’t affect your score.

Just remember, we’re not a lender, we’re a credit broker working with selected lenders†. That means we don’t provide credit, but we can help you find credit offers from a variety of companies.

Compare credit cards with Experian