Credit Cards for People with a Bad Credit History

Even if you have a history of bad credit, credit cards and other borrowing options may still be available to you.  A surprisingly large proportion of people in the UK have had credit problems of some description.  From a couple of late payments on a previous credit commitment, to serious arrears or defaults on payments, maintaining a good credit history can be as much to do with luck as with good financial management.

In the financial crisis and recession of the last few years, more and more people have lost their jobs, had their income curtailed or otherwise found it difficult to meet the rising costs of living.  When your priorities are your mortgage or rent payments, food, electricity and so on, it’s often things like credit card repayments that are the first to suffer when you’re struggling to make ends meet.

Understanding your credit history

There are three main ‘credit reference agencies’ in the UK, called Experian, Equifax and Callcredit.  These agencies hold a record of your name, address and date of birth, and match these against any credit commitments that you have held, or even applied for.  Your credit profile will show how much you have owed and to whom, and record your payment history for each source of credit.

If you have had missed payments or arrears on any of your credit commitments (and remember this could include car payments or store credit, as well as more obvious things like your mortgage, personal loans or credit cards) this will be reflected on your credit file.

When you apply for a credit card, loan or any other form of credit, the lender will automatically check your credit record with one or more of the credit reference agencies.  If you have a history of bad credit, credit card defaults or missed payments, this will affect the lender’s decision on whether to give you credit, and possibly also affect the interest rate you qualify for.

Can I have a credit card?

In recent years financial institutions have become more receptive to the idea that the way to deal with customers with a bad credit history isn’t just to refuse them any further credit, but rather to offer special products designed for these ‘riskier’ customers, with suitable terms and conditions and priced accordingly.

You’ll generally find that for such ‘bad credit credit cards’ UK lenders will charge a significantly higher rate of interest than on their standard cards — for example 29% or more compared to a 13% ‘typical’ rate.  Some providers may charge an annual fee on their cards.  If you have had credit problems in the past, you should also be prepared for the initial credit limit on the card to be fairly low, and only likely to be increased once you have achieved a reasonable track record of meeting your monthly payments and responsible card use.

Most credit card providers offer a fast turnaround on applications, and in many cases a bad credit credit instant decision will be given, along with confirmation of your credit limit and the applicable interest rate.  If you do have a history of bad credit, credit cards specifically designed to meet your circumstances can be a good way to start to rebuild your credit profile.