We all have a credit rating. It's just that some people have a better rating than others – and that can make a big difference when you apply for a financial product such as a credit card.
Banks, building societies and other lenders check your rating to see how risky a customer you would be. If you have a poor rating, you might be charged a higher rate of interest – or you might not be offered the product at all.
You can damage your rating by missing repayment deadlines or by defaulting on a debt completely. County Court Judgments and bankruptcy orders will also count against you.
You might also have a 'bad' credit score if you've never had a credit card, mortgage or loan before, as there's no evidence of how you might manage any borrowing.
Here's how to check your credit score.
Even if you have a low credit score, you can still get access to credit – that's because there are cards specifically designed for those with a less-than-perfect credit score.
Known as 'credit builder' cards, these products are designed to help those with poor credit scores re-build their credit ratings.
Credit builder cards are a potential lifeline for people who people who struggle to get any other type of credit.
Ins and outs of credit builder cards
However, as customers are considered high risk by the card provider, they charge high interest rates. So if you're considering this type of card, you must be certain you can clear your balance in full and on time each month and thus avoid paying any interest.
Failing to make your payments on time means you could be hit with steep charges, and you'd damage your credit score further.
Bear in mind too that credit limits on this type of card tend to be very low, typically starting from around £250, although they will usually rise over time provided you can prove you are able to manage your debts responsibly.
If you've got a poor credit score, there's no guarantee you'll be accepted for the card you're interested in.
Use MoneySuperMarket's Smart Search
Each lenders has different customer acceptance criteria, so while one might accept your application, another might turn you down.
Unfortunately, the very act of applying for a credit card and being turned down can have a negative effect on your credit score, especially if you're turned down for several cards in quick succession.
Lenders see this activity and conclude that you might just be too risky a prospect to consider.
That's why we've developed Smart Search. It enables you to enter your details and run a 'soft search' of the available cards, which lenders and card providers won't be able to see.
The tool will then come up with a list of cards and will show you how likely you are to be accepted for each. With some, you could even be 'Pre-approved', subject to routine anti-fraud checks.
Remember: using the tool won't have any impact on your credit score.
Here's our rundown of some of the current top credit cards for bad credit.
Leading credit builder cards
Vanquis Bank Chrome
This card has a comparatively low representative 24.7% APR (variable)*.
Bear in mind, however, that you may be charged a higher interest rate than this, depending on your individual circumstances.
Initially, you'll be offered a credit limit ranging from £250 up to £1,000, again depending on your circumstances, but this limit could increase after five months, and again every five months after that, up to a maximum of £4,000.
Aqua Classic 27
The Aqua Classic 27 credit card offers a free credit report and credit score.
It has a representative 27.4% APR (variable)** which again is lower than many other credit builder cards.
However, you may be offered a higher rate, and even if you aren't it's still important to clear you balance in full each month if you want to avoid interest charges.
Initial credit limits range from £250 up to £1,200, but these limits could increase after four months.
You won't be eligible for this card if you've had a CCJ in the last year, or if you've been declared bankrupt in the last 18 months.
Tesco Bank Foundation Clubcard
This card enables you to set up e-mail and text alerts to help you make sure you don't miss any monthly payments. You can also get a free credit report.
The card has a representative 27.5% APR (variable)*** but you could be offered a rate as high as 39.94% APR (variable) depending on your circumstances.
You must earn at least £5,000 a year to qualify for this card, and you're more likely to be accepted if you haven't had any CCJs against you in the past 18 months, and if you haven't had an account closed in the last year due to missing repayments.
*Representative example: if you spend £1,200 at a purchase interest rate of 24.70% p.a. (variable), your representative rate will be 24.7% APR (variable).
**Representative example: if you spend £1,200 at a purchase interest rate of 27.45% p.a. (variable), your representative rate will be 27.4% APR (variable).
***Representative example: if you spend £1,200 at a purchase interest rate of 27.5% p.a. (variable), your representative rate will be 27.5% APR (variable).
In order to keep the rate you are offered, you will need to stay within your credit limit and pay the minimum monthly payment on time.
All cards subject to status and terms and conditions. Over 18s, UK residents only.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.