Best Credit Building Cards

If you need to boost your credit score or build it from scratch, here are the best credit building cards to help you do so, with some attractive rewards thrown in, too!

Do you want to boost your credit score but not sure how to start? The best credit building cards can certainly be the stepping stones to a higher score.

Whether you’re new to credit, a young adult stepping into financial independence, or recovering from past financial mishaps (we’ve all made them), this type of credit card is ideal for you.

While it might sound counterintuitive to put a credit card in your pocket to improve your creditworthiness, it’s actually the most effective method – providing you use it strategically (and I’ll be sharing a few tips toward the end of this article to help you do so).

If you’re ready to take a leap toward a higher credit score, take the weight of your feet and read on to discover the best credit building cards to apply for.

What Is A Credit Building Card?

A credit building card – also known as a credit card for bad credit – is one that has been designed for those with a poor credit score because of previous financial mismanagement, or for anyone who hasn’t used credit before.

There are many reasons why you might be denied a standard credit card, and applying for a credit builder card removes the stress. Factors that might cause your application for a credit card to be declined include:

• You have a record of being a poor payer – it could be that you simply forget to pay your bills on time each month
• Your credit rating has been hit by the poor credit rating of a partner on a joint account
• You’ve been declared bankrupt in the last six years
• You’ve had an IBVA in the last six years
• You have no credit management history – because you’ve never had a loan or other credit account
• You have CCJs (County Court Judgements) against you in the last six years.

How Does A Credit Building Card Work?

Credit building cards work in much the same way as other credit cards, except for a couple of key differences.

When you apply, you’ll be credit checked, though the criteria for your application to be accepted are not as strict as they are for standard credit cards. You’ll probably have a smaller credit limit, and should you fail to pay off your balance in full each month, you’re likely to find the interest rate charged is horrendously high.

Other than this, the workings of a credit building card follow the same operational model as other credit cards:

• When you spend on your credit card, you are borrowing money from the card company.
• There will be a set amount of credit you may use (your credit limit).
• You’ll receive a monthly statement.
• Providing you repay your statement balance in full each month when it is due, you won’t be charged interest.
• Fail to pay off the balance in full each month, and you will be charged interest on the outstanding balance.

Using a credit card properly – and making payments when they should be made – demonstrates that you can manage credit well and that you are a reliable payer. These are key attributes that any company will look for when you apply for credit or financial accounts with them.

The Super 6 Credit Building Cards

There are several card options available to help you build your credit score. The ones we have selected all have one thing on common – none charge an annual fee.

Other than this, there are variations to consider. These include your spending patterns, any perks available on the card, and if you want to increase your credit limit over time.

Whether you want to benefit from rewards on your regular spending, need a card but have been bankrupt in the past, or desire a competitive interest rate, you’ll find a card for you in our list.

(Acceptance of your application is subject to each card provider’s terms and conditions and your eligibility.)

Asda Money Select Credit Card

The Asda Money Select Credit Card is another points-earning card, with those points being in the form of Asda Pounds.

Though the interest rate of 34.90% APR is the highest of these seven cards, the rewards are more competitive.

During the first three months of card ownership, you’ll earn a very attractive 5% of spending in Asda Pounds for every real pound you spend at Asda (to a maximum of £50).

After this, the reward rate drops to 1% for spending via the Asda app and 0.3% on spending elsewhere.

Credit limit is between £250 and £5,000.

Barclaycard Forward Credit Card

If you’re new to credit and looking for a card that reduces the interest rate it charges for your responsible use, then this is it.

While the starting interest rate of 33.90% APR is not the lowest, what’s cool about this card is an automatic 3% APR reduction if you make all your payments on time during the first year, and then another 2% reduction for continuing with the good payment record through year two.

There is no interest charged on card spending in the first three months.

You’ll also be eligible for discounts on selected live events, and Barclaycard Cashback Rewards of up to 15% when you spend at its partner retailers (the list is limited, so don’t get too carried away!).

Your credit limit will be between £50 and £1,000.

Capital One Classic Credit Card

If you want a card that allows you to increase your credit limit while boosting your credit score, this is the best choice.

The interest rate of 34.90% isn’t anything to write home about, so you’ll want to pay off your balance each month to avoid this charge.

There are no specific perks, but you could benefit from two increases in your credit limit during the first year of ownership.

Credit limit starts at £200 and rises to as high as £1,500.

Tesco Bank Foundation Card

Ideal if you want to improve your credit score using a card with a competitive interest rate, and that rewards you for shopping at Tesco.

The interest rate of 29.90% APR is the lowest starting interest rate of our reviewed cards.

For every £4 you spend at Tesco, you’ll earn 5 Tesco Clubcard points. Use your card elsewhere, and you’ll receive 1 point for every £8 you spend.

Your starting credit limit will be between £250 and £1,500, and you can apply online.

Sainsbury’s Bank Everyday Credit Card

A competitive interest rate and reward program make this a good card for many.

The interest rate matches its rival, Tesco, at 29.90% APR, though you will not be charged interest for the first three months.

You’ll receive 3 Nectar points for every £2 spent on your card at Sainsbury’s Argos, and Habitat. For other spending on your card, you’ll receive 1 Nectar point for every £5 you spend using your card.

Initial credit limit will be set between £1,000 and £2,000.

Virgin Money All Round Credit Card

A card designed for those seeking to benefit from a 0% balance transfer, introductory rates, and valuable rewards.

The interest rate of 29.90% APR is competitive.

The Virgin All Round Credit Card offers a range of ways to earn Virgin Points, which you can then spend on things like entertainment, clothes, food and drink, days out, and even flights.

Credit limit is subject to status.

Pros & Cons Of Credit Building Cards

Before deciding whether a credit builder card is for you, you should understand what you’re getting into. A quick review of the advantages and disadvantages of these cards should help you:

The Pros

Credit building cards will:

• Give you access to credit for which you might not otherwise qualify because of your poor credit score.

• Help teach you financial discipline by requiring regular payments – and financial discipline is a key characteristic of financial wellbeing.

• Help to improve your credit score providing you use them regularly and make timely payments.

• Have lower, more manageable credit limits that limit the potential to build up high amounts of debt.

• Lead to access to better financial products as your credit score improves.

• May include other features and benefits, such as reward points for everyday spending and access to beneficial insurances.

The Cons

Owning a credit building card is not all a bed of roses! These cards:

• Charge high rates of interest, so carrying balances from one month to the next can be more costly.

• Offer lower credit limits, which reduces purchasing power and convenience of card ownership.

• May charge high fees for set-up, maintenance, and annual fees compared to other credit cards.

• Do not eliminate the temptation to overspend and build up your debt, which can lead to high interest charges and a downward spiral in your finances.

• Offer limited benefits, making them less attractive than other cards you might qualify for.

• Do not eliminate the need for good financial management and spending habits – miss a payment and it will damage your credit score.

Why You Should Check Your Credit Score

When you apply for a credit card, the card provider will run a credit check on you. They will approach a Credit Rating Agency (CRA) and ask for your credit report – this is known as a hard credit check, and will show up on your credit report.

A hard credit check can also be detrimental to your credit score, and the more you make in a short time, the more damage credit applications will do – especially if your applications are rejected.

Even if you have no history of using credit, you could be seen as a risk by lenders – how can they know if you manage debt well if you’ve never had a loan or other credit facility?

This is why I would always recommend that you check your credit score before applying for any credit, including credit cards. A low credit score needs to be boosted to get access to more and better financial products, higher credit limits, and lower interest rates.

Where Can You Check Your Credit Score?

You can check your credit score and view your credit report through four platforms in the UK – each providing details from one of the UK’s big three CRAs. If you want to know what’s your credit score, here are the services you need:

Experian

Experian is the UK’s largest CRA, and you can get your basic credit report from its Experian Free Service. For a more detailed view, including recommendations for how to improve your credit score, you’ll need to subscribe to its CreditExpert service (there is a 30-day free trial period).

TransUnion

A free service to access your TransUnion credit report is available from Credit Karma. Your report is updated weekly, and there are charts and graphs to help you track your progress over time.

You’ll receive personalised tips, and there’s also a useful eligibility checker to help you decide which company is most likely to accept an application for a financial account.

Equifax

To access your Equifax credit report, you’ll need to sign up to ClearScore, which is also a free service. Like Credit Karma, ClearScore updates your credit score weekly.

It includes a timeline to help you see how your credit score is trending, and also shows how you compare to national and local average scores. You’ll receive tips, and an eligibility checker is included.

Equifax also offer a paid-for service that is like Experian’s CreditExpert.

Checkmyfile

Offering a broader view, Checkmyfile compiles data from Experian, Equifax, and TransUnion into a single report. This comprehensive approach helps you understand how your credit score looks across the different CRAs.

This is a subscription service, though there is a 30-day free trial.

How To Use A Credit Building Card to Boost Your Credit Score

Opening and using a credit building card is one of the best strategies to help improve your credit score. But, as with all credit cards, it could also be your downfall.

Use it unwisely – give in to temptation, be fooled by easy credit, rack up an unmanageable balance, and miss payments – and your credit score will crumble.

Here are nine practical tips to ensure you don’t fall into the credit trap and a debt spiral, and successfully improve your credit score.

1. Use Your Card

A credit building card needs to be used. If you don’t use it, you won’t build up a history of good financial management – a CRA can’t measure data that isn’t there!

So, use your card to pay for things that you would normally buy, like groceries, fuel, lunch, etc., and settle your credit card bill every month.

2. Keep Your Credit Utilisation Low

Credit utilisation – your balance versus your credit limit – is one of the highest-weighted factors in determining your credit score.

Low utilisation indicates that you manage credit well and don’t rely on borrowing money to pay for your daily life. Try to keep your credit utilisation below 30%.

3. Make Payments On Time Every Month

This is the most crucial factor in your credit score. The easiest way to avoid missing a payment is to set up a direct debit for a few days before your payment is due each month.

4. Always Pay Your Whole Balance Each Month

Paying your whole balance each month will ensure you don’t get charged interest. It also indicates that you understand your spending limits and can handle a credit facility without overspending.

5. If You Can’t Pay In Full, Pay More Than The Minimum

If you do get into a situation where you are unable to pay your balance in full, make sure to pay more than the minimum payment required by the credit card provider. If you only pay the minimum, not only will your balance take longer to repay, you’ll also be paying more in interest.

Paying only the minimum is an indication that you’re finding it tough to cope with the credit you have.

6. Monitor Your Credit Score Regularly

Keep track of how your credit score is evolving. It usually takes around three to four months of card use for your score to start improving.

Monitoring your score will help you to understand how your financial habits are affecting your credit report, and you’ll also be alerted early to any errors on your credit score that need to be corrected.

7. Don’t Use Your Card To Withdraw Cash

If you withdraw cash on your credit card, you’re setting yourself up for a credit score failure. Not only will you incur interest on the amount you withdraw from day one, but the cash withdrawal is noted by CRAs – to them, withdrawing cash on a credit card is a big red flag.

8. Update Your Lender On Changes

Make your card provider aware of any changes in your personal circumstances, such as a change of address. Especially if you get a new job with better pay, or receive a pay rise, let your card provider know – they might reduce your interest rate or increase your credit limit.

9. Always Have The Cash To Pay Off Your Whole Balance

Here’s a little trick I use. Whenever I use my credit card, I move the money I have spent on my card from my current account to a separate savings account, rounding my spending up to the nearest pound.

I do this daily, and it ensures that I always have enough money to pay my credit card balance. Those small roundups quickly add up, too.

Plus, while interest rates aren’t too hot for savers right now, if you open one of the best regular savings accounts, you can retain instant access to your money while earning a little extra.

Should you get to a point where there’s no money left in your current account, stop spending on your credit card. After a couple of months with a week of a self-imposed prohibition on spending, you’ll soon improve your spending habits!

The Bottom Line: Credit Building Simplified

On the road to building – or rebuilding – your credit score, credit building cards are invaluable tools. By choosing the best for you and then using it wisely, making payments consistently, and using a credit builder card’s benefits strategically, you’ll not only boost your credit score, but you could also rack up some rewarding benefits.

Remember, the higher your credit score is, the greater access to better financial products you’ll have – including credit on more favourable terms.