Credit Cards for People with Bad Credit or No Credit History

Even if you have bad credit, or no credit history at all, there are still many credit card offers to choose from. Having credit cards not only gives you convenient access to cash and credit, it can also help you build a credit history and re-establish good credit.

There are two main types of bad credit cards. Unsecured credit cards for people with bad or no credit history function like a standard credit card, except the credit line will be lower and the fees higher. Secured credit cards are cards backed by a deposit you make into a bank account, which serves as security for the card.

When you compare credit cards, keep in mind that the best credit card offers require a good credit rating, so you may start with a low credit limit, more stringent terms, and higher fees. But rest assured, as long as you make your payments on time, your credit limit and the terms will steadily improve over time.

Another option is a prepaid credit card that needs to be recharged before it can be used for payments.

What you should know if you want to apply for a credit card but do have bad credit or do not have any credit history

As many as one in five people face problems applying for a credit credit  and it is not just the poor who can find lenders less than willing to help. Anyone who has had credit problems in the past will find their options severely limited. Others might never have had credit before, but that in itself can provide a barrier to obtaining credit.

When assessing a persons application for credit,  lenders, look at two areas: the persons credit history and their credit score. An adverse credit history will certainly amount to a low or poor credit rating, but a clean credit history, or none at all, is no guarantee of a good credit score either.

Bankruptcy, CCJs, Defaults, Arrears

Few lenders will consider credit card applications from undischarged bankrupts, and even having been bankrupt in the past will be a barrier. Serious problems such as county court judgements (CCJ), bankruptcy or defaults on a loan will stay on file for six years; bankruptcies and CCJs are a matter of public record, with details held by the courts.

Less serious, but still problematic is a history of missing payments on a personal loan, credit card or a mortgage. Mortgage arrears are given particular weight by lenders.  A default - where a lender has effectively given up chasing repayments - is also extremely serious.

One or two late payments on a credit card might not be a problem. Typically, lenders will only contact credit reference agencies once an account has been in the red for some time, so being a day or two late with a monthly payment should not create a black mark. Lenders, though, are looking for habitual late payment: this suggests the borrower is struggling to cope.

Multiple Applications for Credit

Multiple applications for credit, successful or not, can be an issue. Each time someone applies for a card,  personal loan or a store card,  a credit search is undertaken by the lender. Each search leaves a "footprint" on the individual's credit reference file. This is not necessarily a problem, but too many footprints can trigger warning bells for lenders.

Higher Interest Rates with a Poor Credit History

A poor credit rating will cost you money. The best credit card deals are only open to people who meet the credit scoring requirements set down by the main lenders. People with a poor score, or a blemished credit record, will not be able to take out mainstream credit cards.

Credit Cards With Poor Credit Rating

The good news is some issuers in the UK offer a flexible assessment process which allows them to consider all applications fairly whatever the credit history of the applicant. 

Capital One's Classic Visa Card is aimed at people with a bad credit history who might have been refused a card in the the past. The card is aimed at helping people strengthen and rebuild their credit history. The card offers credit of between £200 and £2,500, with no annual fee. The initial annual percentage rate (APR) is high at 29.9 but is reduced once you build up a steady payment record.

The number of lenders willing to accept individuals with past credit problems is growing and there are a few credit cards for people with poor credit available. 

Improve Your Credit Rating

If you ensure you repay each month so there is no charge, after a year you will have built sufficient credit history to enable you to move to a card with a more competitive rate of interest. If used sensibly a credit card can help you strengthen or rebuild your credit rating.

Prepaid Credit Cards

There is a range of rechargeable credit cards available that do not need any proof of good credit history. Compare prepaid credit cards here.