If you’ve ever been turned down for credit, whether a loan, credit card, or even a mobile phone contract, it could because you have bad credit. This could be down to you handling previous borrowing poorly, by making late repayments or missing them completely, or just because you’ve never taken out credit before.
In either case, a credit card for bad credit could help to build or rebuild your credit score – so long as you use it correctly. Here’s more on how to repair a bad credit score with a Vanquis credit card.
What is bad credit?
Bad credit is a term used to describe a low credit score, damaged credit file, or limited credit history. Having bad credit can make it more difficult to get acceptance for a loan or credit card.
When working out your credit score and deciding whether to accept your application, lenders use information held by one of the UK’s three credit referencing agencies – Equifax, Experian and TransUnion. They’ll then use this alongside other factors, such as your employment status and income, to work out whether to offer you credit.
Although there is no specific number that denotes a bad credit score, if you’ve handled credit badly in the past or if you’ve never taken out any form of credit, then it’s likely you’ll be considered a bad credit customer.
If so, you might find some lenders will reject your credit application, in which case it might be worth looking at credit cards for bad credit as a way to help rebuild your credit score.
What is a credit card for bad credit?
Credit cards for poor credit are, as the name suggests, credit cards that have been designed for people with bad credit. These cards often come with a low credit limit to minimise the risk of you getting into financial difficulty, and a relatively high interest rate, to help make sure you manage your credit responsibly.
If your credit score is considered poor for any reason, whether you’ve never taken on any credit before, you’ve handled it badly in the past, or if you’ve just been discharged from a bankruptcy or an IVA, it’s worth considering a credit card for poor credit to help rebuild your credit score
Reasons you could have bad credit
There are a number of reasons why you could have bad credit, but the most common reasons for a poor credit score are:
- Breaking your credit agreement – Any credit arrangement you sign comes with an agreement that you’ll at least make the minimum payments on time and never go over your credit limit. Breaking any of these terms will have a negative impact on your credit file, lower your credit score and affect your ability to get credit.
- Getting into financial difficulty – If you get into financial difficulty and can’t keep up repayments on borrowing then this will affect your credit score. If things get to the point where you need an Individual Voluntary Arrangement (IVA) to help sort things out, or have to declare yourself bankrupt, then this can have a lasting effect on your credit score. Similarly, if you find yourself issued with a County Court Judgement (CCJ), this could stay on your credit file for six years and make getting credit more difficult.
- Being close to your credit limit – Although it can be tempting to spend on your credit card and only repay the minimum amount each month, this can see you quickly reach your credit limit. If you use up too much of your available credit, this can have a negative impact on your credit score, even if you don’t go over your limit. Always try to pay the full amount off each month, or at least repay more than the minimum, and try to keep your usage down to no more than 50% of your credit limit.
- Having no credit history – You might also be considered to have ‘bad credit’ if you’ve never taken out a credit card or any kind of loan. This is because lenders and credit reference agencies have no way of knowing how you handle credit.
- Having too many credit searches – If you get rejected for credit, resist the temptation to keep applying to different lenders. Multiple applications mean multiple hard searches on your credit file, and too many in a short space of time can put a dent in your credit score.
If any of the above applies to you, bad credit credit cards could be a good option to help improve your credit rating.
Can I get a credit card with bad credit?
Yes. You can get a credit card with bad credit, but you have to make sure you apply specifically for a card designed for poor credit.
Although there are many different types of credit cards available, each with different perks that range from 0% balance transfers, to interest-free purchases and even cashback, these cards are usually only available to people with good or excellent scores.
If you’re looking for a credit card but you have a poor credit score, you may want to consider a credit card for bad credit and select an option that’s most suited to your circumstances. If you then use this card correctly and repair your credit history, you may become eligible for other cards in the future.
What if I have no credit history?
If you have no credit history, this means you’re essentially ‘invisible’ to lenders and credit referencing agencies, who have no way of knowing how you manage your money or how you handle credit. If you want to take out a credit card, you may need to apply for a credit card for bad credit – this can then be used to help build up your credit score.
If you have no credit history, using credit correctly might see your score improve more quickly than if you have a bad credit history. It’s worth noting that things like CCJs, IVAs, and even missed payments are visible on your credit report and can lower your score, so it helps to keep on top of your finances.
What is considered a bad or poor credit rating?
There’s no one number that denotes a bad or poor credit rating, and each lender will look for different things in potential customers - while you may be one lender's ideal customer, you might still be rejected by others.
When you apply for credit, the company you want to borrow from will check the information held on your credit file by one of the three main credit reference agencies – Equifax, Experian, and TransUnion. These agencies share information with building societies, banks and retailers to build a picture of how "creditworthy" you are, how well you can handle money, and how likely you are to repay the money you borrow from them.
Your credit rating is based upon several factors, including employment status, the type of credit you’re applying for, the number of applications you’ve made recently, the amount of credit you currently have and how well you are managing it.
Although there's no easy way to tell what credit score a lender will give you, you can check your credit history, which may give you an indication of your likelihood of acceptance before applying.
Will my eligibility be guaranteed with a credit card check?
Some lenders offering credit cards for people with bad credit will usually offer the option of an initial eligibility check. This allows you to check whether you’ll be accepted for a card without any trace of a credit search being left on your credit file - remember, too many searches in a short space of time can have a negative effect on your score.
But you need to bear in mind that this eligibility check is not likely to be an unconditional ‘guaranteed acceptance’, as there are typically fraud and verification checks which may need to take place and may not be possible to complete instantly. But it does give a good indication of whether you’ll be accepted and offer a strong degree of certainty before you decide to commit to completing their application.
If you then go through with the full application, you’ll be subject to a full credit check that will be noted on your credit file.
How to repair a bad credit score with a Vanquis credit card?
A credit card designed for people with a low or no credit score can offer an effective way to repair or build your credit score - but you need to make sure you use it correctly.
Here’s how Vanquis bad credit cards can be used to repair your credit score:
- Always pay at least the minimum amount off each month, but pay more – or even the full balance – if you can, to cut down on the amount of interest you’ll pay.
- Never miss a payment. To make sure you never miss a payment, it might be worth setting up a Direct Debit for the minimum amount.
- Don’t use all of your credit. If possible, try to pay the balance off in full at the end of each month, this will ensure you don’t pay any interest on your spending and show lenders you’re not over-reliant on credit.
Apply online today
Vanquis Bank helps people who have been turned down for credit elsewhere, offering a responsible and reliable financial service and providing a sensible way to stay in control of your money.
For more information about applying for a credit card with us, go to Check Your Eligibility
- Vanquis Visa Card is only available to UK residents over 18’s.
- Vanquis Visa Card is issued by Vanquis Bank Limited, No. 1 Godwin Street, Bradford, West Yorkshire BD1 2SU.