A credit card for a low credit score is designed to help individuals in UK who have misused credit in the past to repair their credit score through reasonable loans and repayments.

How do credit cards for a low credit score work in the UK?

Similar to regular credit cards, you spend money up to an agreed amount and pay back what you borrow. If you fail to make the scheduled payments, you will start paying interest on what you owe.

However, these particular credit cards are distinguished by two factors:

• They have lower credit limits
• They have higher interest rates (APRs)

A bad credit score tells credit card lenders in UK that you’ve had financial problems in the past, so they won’t let you apply for a personal loan right away or for very large amounts of money. They will also charge more interest as an incentive to make your repayments.

Keep up with your payments and you will slowly build your credit report and improve your score, which will make you eligible for cards with higher limits and lower interest rates in the future. Improving your credit history and also your credit report.

If you haven’t applied for a credit card in UK yet, there are many credit card eligibility calculators available in UK that will show you the credit cards you’re most likely to be accepted for. This way you can protect your credit score by applying only for the cards that are right for you. These calculators assesses various factors before showing the right cards as follows:

• Accurate results: Assesses the likelihood of each card being approved out of 10.
• Apply with confidence: This shows your eligibility before applying, so you can be confident that your card application is not rejected.
• View guaranteed cards: You’ll see which cards you’re guaranteed to get so you won’t have any unpleasant surprises in the future.

Difference between LOW CREDIT SCORE and NO CREDIT?

“LOW CREDIT SCORE” means that you have a credit history but have made certain mistakes in the past in using credit. While “NO CREDIT” indicates that you are young or have a limited credit history.

Related reading: 11 types of personal loan in UK

Pros and cons of credit cards for low credit scores in UK?

• You can improve your credit score
• You are more likely to be accepted
• Your purchases are protected
• High interest rates
• Low credit limits
• Risk of more debt

How else can I improve my credit score?

Whether you have a ‘low credit score’ or ‘no credit’, you can take steps to improve your credit rating:

• Register on the voter registration census as card lenders in UK use this as proof of your address.
• Check your credit report for errors, as these may be affecting your score.
• Pay your bills on time and in full to show that you can borrow and repay responsibly, as a sort of payment history.
• Limit the number of credit applications you make, as it will leave a mark on your report.
• Do not use more than 50% of your credit limit as this will indicate to lenders that your finances are unstable.
• Close your unused credit accounts, as having numerous open lines of credit also implies instability.
• Closing your accounts may negatively affect your credit score initially, but this is only temporary.

What is a bad credit score?

Credit scores vary for each individual. A bad credit score means that in the eyes of lenders you are not a trustworthy person. That is, lenders don’t trust you to pay them back. So they will either give you a loan at a higher interest rate or refuse to lend you money at all.

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at nikeshmehta@allonmoney.com.