How can a credit card to build credit help?
If you have low or minimal credit history this can also count against you as lenders are unable to determine your credit behavior. Using a credit builder card demonstrates an individual’s creditworthiness. A credit building card such as the 118 118 Money Credit Card can help in these instances.
A credit card designed to build credit works broadly in the same way a normal credit card does. You make purchases on the card and then pay it off. You could choose to pay the balance off in its entirety, therefore avoiding any interest charges. If not, you are then charged interest on any balances which you don’t repay.
Providing you manage your card and stay within the credit limit whilst making minimum monthly payments, this can positively impact your score. Credit builder credit cards generally come with lower spending limits and a higher rate of interest.
When building your credit profile, it’s generally good practice to stay within your credit limit and try to pay off the balance each month. In addition, if you keep your balances low this is a better reflection on your credit utilisation ratio. Put simply, this is a measure of your credit card balance compared to the total credit available. For example, if you have a £1,000 credit limit on your card and a balance of £500, your credit utilisation is 50%. Generally, the lower your credit utilisation, the better. Especially in circumstances where you are attempting to rebuild credit.
Can I be accepted for a credit card with bad credit?
Bad credit or not having any credit history can limit the type of credit you have access to. Missed or late repayments are recorded on your credit file held with agencies such as Experian, Equifax or TransUnion. Your credit history is taken into account when applying for any form of credit. Therefore, having a less than perfect credit history can impact what type of credit a lender may be willing to offer you.
A credit building credit card may be a solution if you’re aware that you have a less than perfect credit rating. The 118 118 Credit Card is a card designed to cater for those looking to improve their credit rating providing you stay within your credit limit and repay your monthly payments each month.