What is a 'bad credit' credit card and how does it work?
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.
Which credit card to rebuild credit is best for you?
Comparing different credit cards is a key part of getting the best deal for you. Money to the Masses has helped to simplify this process by partnering with Creditec*, an online comparison service. You do not need to trawl through countless different provider websites hunting for the best cashback or lowest fees, as Creditec’s personalised search results will show you the key details you need to know in one place. Your tailored list will also feature the cards that you are more likely to be accepted for, cutting down the chance of any applications you make being rejected. Your search results are built using a soft credit search, so there will be no damage to your credit score. You can start your search by clicking this link*.
The best credit cards to rebuild credit – January 2025
| Name of card | Representative APR (variable) | Annual fee | Perks | Best for |
| Tesco Bank Foundation Credit Card - Check eligibility | 29.90% | £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 |
| Asda Money Select Credit Card - Check eligibility | 34.90% | £0 | 5% Asda spending back in 'Asda Pounds' (up to £50) in the first 90 days, then 1%, via the ASDA app. 0.3% on spending elsewhere | Those who want to earn rewards while building their credit |
| Capital One Classic Credit Card - Check eligibility | 34.90% | £0 | Up to two optional credit limit increases per year (subject to eligibility) | Those wanting to gradually increase their credit limit over time |
| Post Office Credit Card - Check eligibility | 29.90% | £0 | None | Those looking for a card with a competitive interest rate |
| Virgin Money 12 Month All Round Credit Card - Check eligibility | 29.90% | £0 | None | Those looking for a card with a competitive interest rate |
| Barclaycard Forward Credit Card - Check eligibility | 33.90% | £0 | 3% reduction if you make all payments on time for first year, further 2% reduction if you then do the same in the second year. Plus discounts on live events with Barclaycard Entertainment | Those looking for a credit-builder credit card with interest-rate reduction |
Best credit-builder credit card with low APR
- Best for: Those who frequently shop at Tesco
- Representative APR: 29.90% variable
- Credit limits: £250 to £1,500
- 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 rising credit limit
- Best for: Those who have defaults, CCJs or bankruptcy, if not in the past 12 months
- Representative APR: 29.80% variable
- Credit limits: £200 to £1,500
- 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'
Best credit-builder credit card with rewards
- Best for: Those who want to earn rewards while building their credit
- Representative APR: 34.90% variable
- Credit limits: £250 to £5,000
- Interest-rate reduction: N/A
- Perks: Get 1% (5% for the first 90 days) Asda spending paid back in 'Asda pounds' via the ASDA app. 0.3% on spending elsewhere.
- Annual fee: £0
- Why we like it: It offers the potential to build credit and earn rewards via your weekly shop
Read our full review: 'ASDA Money Select credit card review'
How to make the most of your credit-builder credit card
Credit-builder credit cards usually come with a higher annual percentage rate (APR) and lower credit limit than regular credit cards. You can avoid the higher interest charges by paying off any outstanding balance on your card before the end of the billing period, which is usually 56 day. This will also help to build up your credit rating as it shows you are able to manage your finances. You can read more about building your credit rating using a credit card in our article 'How to build your credit score with a credit card'.
Another way to make the most of your credit-builder credit card is to maximise the rewards and perks on offer. This could mean trying to shop at the supermarket linked to the card or spending the rewards points you earn in the most efficient way. Keep in mind that you should not spend more money chasing extra rewards points, as the points rarely outweigh the cost of the additional spending.
What to consider before you get a credit card to build credit
The right credit card can help you build a credit history and boost your credit score by showing you are a responsible borrower. If you have never borrowed money before or you have a poor borrowing history, you may be able to build up a good record of borrowing and repaying with a credit-builder card. However, missing payments will quickly send your credit score in the wrong direction. The point of a credit-builder card is to show you can spend borrowed money without exceeding the provider’s limit and without missing repayments, this means keeping to your credit limit and repaying the balance in full every month is key. If you think that it will be too challenging to make the payments on time, you should consider an alternative spending option.
The pros & cons of a credit-builder credit card
Pros 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
Cons of a credit-builder credit card
- Higher monthly interest rate on the outstanding balance
- Lower level of credit available than mainstream credit cards
- Restricted choice of cards available
Alternatives to a credit-builder credit card
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'.
Current account
You could choose not to borrow any money at all. If you already have cash in your current account, simply spending on your debit card could be a good option. There are lots of benefits to using debit cards for everyday spending, including cashback, rewards and sign-up incentives. You can also avoid the possibility of getting yourself into problematic debt, being charged for cash withdrawals and having to pay interest. Read our article ‘Best bank account switching offers, cashback & incentives’ to see what options are available.
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