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The day you decide to get your first credit card can be a monumental step into adulthood; learning how to build a great credit score and manage your finances. However, you may find it harder to borrow credit or possibly even take out a mortgage without evidence of a good credit score which must be built up over time.
If you need to build a better credit record from scratch, MoneyBright has compiled a list of the best credit cards to build credit where we will compare credit cards as well as answer frequently asked questions surrounding credit builder cards and how to improve your credit score.
- What Is A Credit Building Credit Card?
- How Do I Qualify For A Credit Builder Card?
- Are Credit Builder Cards Worth It?
- What Are The Advantages Of Credit Builder Cards?
- What Are The Disadvantages Of Credit Builder Cards?
What Is A Credit Building Credit Card?
Credit building credit cards are designed with helping people to build up a better credit history if they have:
Bad credit history – Those who have had debt issues in the past or struggled with bills. This also includes those who have faced bankruptcy or a county court judgement (CCJ).
No credit history – These are most often students or those applying for their first credit card as they have no evidence they can pay back loans to a bank yet.
Credit building credit cards work by allowing you to make smaller purchases with a low credit score, to begin with, which you must show you can repay within each month you use your first credit card. Over time, if you show that you can make pay back your credit balance in full each month you will gradually grow a stronger credit rating which will then allow you to apply for better credit cards that offer perks such as rewards and a 0% promotional rate on purchases and balance transfers.
How Do I Qualify For A Credit Builder Card?
You must be 18 (some credit building cards may require you to be older), employed and also live within the UK to start with. Whilst most credit cards maintain strict eligibility guidelines, credit builder cards are much easier to apply for due to the fact they are designed for those with bad credit, to begin with. You can check if you will be accepted for a credit builder card with eligibility checkers online which are easy to use and help you to compare what credit builder cards would best suit you too.
Are Credit Builder Cards Worth It?
As long as you use your credit building card responsibly by following these management tips:
- Make repayments on time and in full each month.
- Avoiding late payments which would result in paying interest rates.
- Making minimum repayments if you struggle to repay the credit within the month – setting up a direct debit will help with this.
If you can fulfil these guidelines, then they are a great way to increase your credit score and are worth looking into when applying for your first credit card.
What Are The Advantages Of Credit Building Cards?
Credit building cards should help to improve your eligibility to take out credit from your bank as a strong credit score implies you can be trusted to make repayments in full and on time.
- Boost your credit score – By allowing you to make small purchases, to begin with, which in turn, will slowly improve your credit score over a period of time and allow you to apply for better credit cards in the future.
- Easier to apply for – Since they are made for those with bad credit scores, the criteria for acceptance is much lower and more flexible than applying for regular credit cards.
- FCA protected – The Financial Conduct Authority protects purchases between £100 and £30,000 under Section 75 of the Consumer Credit Act 1974.
What Are The Disadvantages Of Credit Building Cards?
Restricted credit limits
You won’t be able to take out as much money as other credit cards, this is because you have not built up enough evidence yet for your bank to trust you to repay larger loans.
Higher interest rates
Credit builder cards are likely to have a higher APR (Annual Percentage Rate) representative meaning you will have to pay a larger amount of interest if you fail to meet repayment deadlines.
Risk of more debt
For those who struggle with their spending habits, you run the risk of creating more debt, so make sure you think carefully before applying for a credit builder card.
The Best Credit Cards To Build Credit History
Based on factors such as interest rate charges, credit limit amounts and benefits, here are some of the best options for those looking to apply for their first credit card:
Sort by:
Amazon Classic
Created by Amazon, this card offers the ability to build a credit rating over time, provided you meet your repayment deadlines and stay within the £500 credit limit given.
REP APR: 29.9% (variable)
Benefits & Perks
- 0% on purchases for 3 months
- £40 gift voucher
Credit Limit: From £500
Why we like it
Not only do you get the first three months of spending at 0%, but you also get little Amazon benefits too! This includes a £40 Amazon gift voucher as well as the ability to collect Amazon Reward Points wherever you shop but you would only see these benefits if you have an Amazon account.
Barclaycard Forward
A great credit card for those applying for their first credit card with no credit score, this Barclaycard offers a credit limit between £50 to £1200 with a 3% APR reduction in the first year which is followed by a 2% reduction the following year. Bear in mind this card requires you to have a minimum annual income of £3k.
REP APR: 33.9% (variable)
Benefits & Perks
- 0% on purchases for 3 months
Credit Limit: £50-£1200
Why we like it
This card also offers a ‘safety net’ of 0% interest within the first 3 months of opening your account alongside handy email alerts to keep you informed of when your next payment is due. This is handy for those who are not used to credit deadlines and who are more likely to forget to repay their credit card.
Capital One Classic
More suited to those with a history of bad credit and who need to improve their credit score, although Capital One offers a no interest-free period of initial benefits, there are still great perks to choosing this card. You must be earning an annual income of £3k minimum and if you fulfil their criteria, you can begin building up your credit rating with their two optional credit limit increases.
REP APR: 34.9% (variable)
Credit Limit: £200-£1500
Why we like it
They have accepted over 4 million people with low credit scores so if you are struggling to get accepted by other credit card companies, this may be a great choice for you.
Chrome From Vanquis Bank
There is a 0% interest rate on purchases in the first 3 months as well as the ability to manage your money easily with their online portal and mobile app however, there are some things worth noting about this card. There are no introductory offers, it is solely focused on building your credit rating and there are penalty fees of £12 if you miss your minimum payment.
REP APR: 29.3% (variable)
Benefits & Perks
- 0% on purchases for 3 months
Credit Limit: £250-£1,000
Why we like it
Unlike its competitors, this card has a considerably low APR representative rate of 29.3% alongside an initial credit limit of £250 to £1000. Better yet, Vanquis offers the possibility for you to build a credit limit of up to £4000 as long as you show good credit management.
Marbles
Designed with acceptance in mind, this card offers no impact on your credit rating when checking for your eligibility which is great for those with a history of being rejected for bad credit. Besides perks like potential credit limit increases after 3 months, there are no rewards and they are not available to anyone with a CCJ (County Court Judgement) against them.
REP APR: 34.9% (variable)
Benefits & Perks
- 0% on purchases for 6 months
Credit Limit: Up to £1200
Why we like it
There is an easy to manage credit limit from £250 to £1200 subject to circumstances as well as no annual fee. It also helps you to keep track of your repayment deadlines by allowing you to select your repayment dates as well as offering text alerts when you are close to your deadlines.
Tesco Foundation
This foundation card is aimed at both those who are new to credit and those with a history of bad credit. It has a decent APR representative under 30%. Beyond this, however, there are no other upfront perks compared to other credit cards.
EP APR: 27.5% (variable)
Credit Limit: £200-£1500
Why we like it
This card is especially great for those with a Tesco Clubcard as you can earn Clubcard points while you build up a better credit score.
Initially, building up a good credit score may seem pointless particularly for students or those applying for credit cards for the first time. However, providing evidence early on in your financial journey that you know how to manage money wisely, meet repayment deadlines and take responsibility for your account will only bring you benefits in the future as you will have a glorious credit record to show for your efforts.
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