Credit-builder credit cards are designed for people who have a low credit score, either because they have mismanaged their finances in the past or, alternatively, haven't used credit products in the past.
An application for a mainstream credit card could be declined if you:
- Have had debt problems in the past
- Have been made bankrupt or had an Individual Voluntary Arrangement (IVA) in the past six years
- Have a County Court Judgement (CCJ) against your name in the past six years
- Have unpaid bills in your name or jointly with someone else
- Are not on the electoral roll
- Have no history of borrowing or have never had a credit card
If you have been declined for a mainstream credit or fear you will be declined when applying, then a credit-builder credit card may be the right option for you.
The best credit cards to rebuild credit - January 2023
|Name of card||Representative APR||Annual fee||Perks||Best for...|
|29.90% variable||£0||5 Tesco Clubcard points for every £4 spent in Tesco, 1 point for every £8 spent elsewhere||Those looking for a card with a competitive interest rate|
|34.94%||£0||No specific perks||Those wanting to gradually increase their credit limit over time|
|33.90%||£0||Discounts on events with Barclaycard Entertainment||Those wanting to see the interest rate fall if they use the card responsibly|
Best credit-builder credit card with low APR
- Best for: Those who frequently shop at Tesco
- Representative APR: 29.90% variable
- Credit limits: £200-£1500
- Perks: 5 Tesco Clubcard points when you spend £4 in Tesco, 1 Clubcard point when you spend £8 elsewhere, track credit score with Tesco Bank CreditView
- Annual fee: £0
- Why we like it: It has a reasonably low APR compared with other credit-builder cards, as well as the added bonus of letting you collect Tesco Clubcard points against your day-to-day spending
Read our full review: "Tesco Foundation credit card review"
Best credit-builder credit card with 0% purchase deal
- Best for: Those who have defaults, CCJs or bankruptcy, if not in the past 12 months
- Representative APR: 34.94% variable
- Credit limits: £200 to £1,500
- Interest-free period: 3 months on purchases
- Perks: No specific perks
- Annual fee: £0
- Why we like it: It offers the potential of two optional credit limit increases per year, if you demonstrate good management of the card
Read our full review: "Capital One Classic credit card review"
Best credit-builder credit card with interest-rate reduction
- Best for: Those who want to benefit from a lower APR by using the card responsibly
- Representative APR: 33.90% variable
- Credit limits: £50 to £1,200
- Interest-rate reduction: 3% reduction if you make all payments on time for first year, further 2% reduction after second year
- Perks: Discounts on live events with Barclaycard Entertainment
- Annual fee: £0
- Why we like it: It incorporates text and email alerts to help you manage your card and earn the interest-rate reductions over the first two years
Read our full review: "Barclaycard Forward credit card review"
How does a credit-builder credit card compare to a regular credit card?
Credit-builder credit cards have higher average percentage rates (APR) and lower credit limits than regular credit cards. You can avoid the higher interest charges by paying off any outstanding balance on your card every month. This will also help to build up your credit rating as it shows you are able to manage your finances.
The pros & cons of a credit-builder credit card
- Allows access to credit that would otherwise be unavailable
- Helps to repair poor credit rating due to previous debt
- Good for people not on the electoral roll or for students living away from home
- Higher monthly interest rate on the outstanding balance
- Lower level of credit available than mainstream credit cards
- Restricted choice of cards available
How to get a credit-builder credit card
Applying for a credit-builder credit card is simple and can be completed online. I would recommend, where available, completing the relevant card's eligibility questionnaire. This is designed to check if you are likely to be successful with a full application. This process does not affect your credit rating so is well worth doing.
How can I improve my credit score without a credit card?
There are some simple actions you can take to improve your credit score, for more information read our detailed article - "How to improve your credit score quickly".
Also, I would suggest reading our article - "LOQBOX Review - Should you use it to improve your credit score?"
What other types of credit card are there?
In this article we have focused on credit cards that can help to improve your credit score. If you already have a good credit score or if you have improved your credit score, you may wish to look at other types of credit card. We have summarised the other types of credit card available below:
Balance-transfer credit card
A balance-transfer credit card allows you to move your existing credit-card debt onto a new credit card, usually on an initial interest-free period as set out by the card provider. Most card providers will charge a fee of around 2-5% to make the transfer.
Check out our article "Best 0% balance transfer credit card deals".
0% purchase credit card
A 0% purchase credit card is a credit card that does not charge any interest on purchases for an initial period of time set by the card provider. This type of card can help to spread the cost of a big purchase.
Check out our article "'Compare the best 0% purchase credit cards".
Cashback and reward credit card
A cashback and reward credit card allows you to earn cashback or rewards as you spend. The interest-free period is usually shorter than a 0% purchase credit card and so it is wise to pay the balance in full each month.
Check out our article "Compare the best cashback and reward credit cards".