Credit Cards for Bad Credit History
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1‘Secured Credit Cards’ – This type of card requires a deposit amount for part or all of the credit you require in order to get the card.
2‘No Credit Check Credit Cards’ – These cards don’t exist – all true credit cards will be issued following a check of your credit score.
3‘Pre-Paid Cards’ – These cards don’t provide you with credit – they require you to load the card with your own money and then you draw down that money.
4‘Bad Credit History Credit Cards’ – These cards normally have higher interest rates and lower credit limits, but do provide credit cards to people who would like the chance to improve their credit history.
What is a Guaranteed Credit Card?
There’s no such thing as a Guaranteed Credit Card or Guaranteed Acceptance Credit Card. They are supposed to be ideal for people with an adverse or bad credit history. Many of these ‘Guaranteed Cards’ claim that you don’t need to go through credit checks, employment checks or any other verification in order to get a MasterCard or VISA credit card.
It sounds too good to be true, and it is. To have one you’ll often have to make a substantial security deposit or pre-pay for your card so you can only spend what you’ve loaded on it in the first place.
If you’re applying for a credit card, all applicants are credit scored, no matter what the card or who the lender may be. All credit card providers want to know what kind of borrower you’ll be before they make a decision to give you a card or not. No one can guarantee acceptance for a credit card, and if you have a bad credit history, it will be difficult (but not impossible) to get one.
What is a No Credit Check Credit Card?
The 'No Credit Check Credit Card' doesn’t really exist either. Any decision to give you credit, whether it’s a loan, paying by monthly instalments for furniture or electrical goods or obtaining a credit card, is based on your credit score. You can find out how your credit score is compiled and how to check your own credit rating in ‘How to Check Your Credit Score.’
Why Might You Think You Need a Guaranteed Credit Card?
- You may already know or suspect that you've got a bad credit history.
- You don’t have enough of a credit history and have never taken out a credit agreement before. Lenders tend to be unwilling to take a risk on someone who does not have a consistent credit record – good or bad.
- You might want to protect your credit history from unnecessary checks. Checking your own credit report won’t lower your score, but a history of a lot of checks by lenders on your credit report in a short time looks bad and could affect your credit rating. You can find out more about this by visiting Credit Expert.
- You may not want to run the risk of being turned down or rejected, especially if you’ve applied several times to several providers before.
Don’t despair. Even though the ‘Guaranteed Credit Card’ doesn’t actually exist, there are still some options and products available that could suit your needs and circumstances.
Prepaid Credit Card
Prepaid credit cards are probably the closest you’ll get to a ‘Guaranteed’ credit card because there’s no need for a credit check. Neither do they have a line of credit to tempt you to spend beyond your means. That means they are not credit cards at all, but more like a cash card. Just like a card that you might use to draw from a bank savings account with a fixed amount of money in it and no overdraft facility.
You can’t get into debt because a prepaid credit card uses money you have paid in advance from your bank account or other source.
The biggest advantage of prepaid credit cards is the fact that it’s impossible for the card to go over your limit into a negative balance. Prepaid credit cards offer the security, flexibility and convenience of a credit card, especially if you are making purchases on the internet, without the worries of debt or overspending. But be aware that prepaid credit cards may involve additional costs, like buying the card itself, monthly charges or transaction and cash withdrawal fees.
Some prepaid cards can help you to strengthen your credit rating by giving you a very small ‘Loan’ (equal to or less than a year's worth of monthly fees). As long as you repay the loan each month by paying your monthly fees, you’ll boost your credit rating by showing lenders that you are a responsible borrower. For example, they may ‘Lend’ you £60, which you pay back by paying your £5 monthly fee every month.
‘Bad Credit History’ Credit Card
You can’t avoid a credit check, so if you know or suspect that you have a bad credit score, it might seem pointless applying for any credit card. However, there are credit cards specifically for people with bad credit records. You are still not guaranteed to get one of these as you would be with pre-paid credit cards, but if you’ve struggled to get a credit card in the past, these could be for you.
These cards can help you improve your credit record and build your credit score over time by demonstrating that you can successfully manage credit. You’ll then be able to apply for other credit cards, loans or mortgages as you need them.
Although acceptance can never be guaranteed, you do stand a much better chance of success with these 'Bad Credit History Credit Cards'. Even though the likelihood of being accepted for a ‘Bad Credit Record’ credit card is reasonably good, it's still wise to check your credit rating before you apply. So, if you have a less than perfect credit history, but still want a credit card that offers you a line of credit, these 'Bad Credit Record Credit Cards' credit cards may be the solution.
You may pay higher than usual interest charges – normally between 29.9% and 59.9% APR (Annual Percentage Rate) - and your credit limit may be lower than you hoped for. However, a higher APR and slightly lower credit limit is probably a small price to pay for a credit card that could help you improve your Credit Record and Credit Score in the long run.
‘Unsecured’ Credit Cards?
There are many definitions of this term and this causes a lot of confusion. Basically, an ‘Unsecured’ credit card is a similar concept to an unsecured loan. Lenders will give you credit and lend you money on an unsecured basis if you have a good credit history and have a high credit score. Most credit cards in the UK are unsecured.
Many personal loans are unsecured in that they are approved solely on the basis of the information contained in your credit report that indicates you are a responsible borrower and a good credit risk.
An unsecured credit card is usually issued to people with a good credit history and good credit score who have demonstrated the ability over time to manage their borrowing and debts responsibly and have repaid any money owed on time.
‘Bad Credit History Unsecured’ Credit Card
Some credit card companies offer ‘Unsecured Credit Cards’ for people with bad credit histories. These 'Unsecured Credit Cards' are just another name for the 'Bad Credit History Credit Cards' available from many providers.
They are ‘Unsecured’ in the sense that they do not require you to deposit any form of cash guarantee or put up any assets against the future debt. These credit cards are only issued after the provider has checked your credit history and while you are not guaranteed to be accepted, they are the best hope you have of getting a credit card if you have poor credit history or your credit score is poor.
If your bad credit history is quite old (at least 18 months ago) and you’ve been keeping things under control since, it might be worth applying for this type of 'Bad Credit History Unsecured Credit Card'.
Credit limits for these cards will normally be low and the interest rate high (usually between 29.9% and 59.9%) as the credit card issuer is taking a greater risk than normal by taking you on. However, these unsecured credit cards will help you rebuild and repair your credit record provided you conduct the account on a responsible basis and make payments regularly and on time.
Secured Credit Cards?
These are similar in concept to a secured loan. Homeowners for example can get substantial loans, even if their credit score is not ideal, by using their property as security for the loan. The lender knows that, if the borrower defaults on loan payments, they can recover what is owed to them by simply selling the house and hence the loan is ‘Secured’ against that asset.
The secured credit card is similar in that it requires you to deposit an amount of cash appropriate to the credit limit you want before you’re issued with a card. This deposit is there to give the card issuer the security of knowing that, should you be late in paying or not make repayments, part or all of that deposit will be used to pay the debt you owe.
You cannot touch those deposited funds while your credit card account is active. Your credit limit is partly determined by the amount of the deposit. A deposit of £100 for example may be sufficient for you to be set a credit limit of between £100 and £150. Some providers demand that the deposit is 100% of the credit limit you require.
Do 'Non Credit Check Credit Cards' Exist?
The short answer is no. At least, not if you are talking about credit cards that give you a generous credit limit based on an assessment of your credit history and your ability to make the monthly payments and conduct the account responsibly.
Any decision to give you credit, whether it’s a loan, paying by monthly instalments for your new sofa, paying your mobile phone contract on a monthly basis, paying into a book club or a catalogue or obtaining a credit card is based on checking your credit score.
A bad credit score results from a bad credit history that could include things on your file such as County Court Judgements, missed or late payments, not being on the electoral roll, giving false details on your credit applications, having too many credit searches in a short space of time or having no credit history at all because you’ve never taken out credit before.
The only genuine ‘No Credit Check Credit Cards’ available are some secured credit cards and prepaid cards.
What are ‘No Credit Check Secured Cards’?
Very few UK companies provide secured credit cards. Most on offer in the UK market are from banks and institutions based in the Baltics such as Latvia and Lithuania. They don’t require a credit check because you must pay a deposit to the credit card issuer before you can even get your hands on the card.
That deposit is locked away in an offshore bank account for the duration of your agreement with the secured card provider. Your desired credit limit may be determined by the amount of the deposit, so if you wanted a credit limit of around £200 for example some providers will demand that the deposit is also £200. If you have that amount of money readily available for a deposit, it’s unlikely that you’ll actually need a bad risk card in the first place.
What are ‘No Credit Check Prepaid Cards’?
These aren’t really credit cards. Basically they are a plastic card with a Mastercard or Visa logo, but you are simply spending your own money.
You can buy them prepaid with a fixed amount or top them up with your own funds, usually with just what you need to spend.
There are no large security deposits to surrender and because there is no credit involved there is no need for a credit check. And because no credit is involved, prepaid credit cards usually do not report to the credit reference agencies.
Some prepaid cards offer loan advance schemes that allow you to establish or rebuild your credit file and that will be reported to the credit reference agencies.
This means many people use these prepaid credit cards as secure private and confidential second credit cards for purchases on the internet that don’t run the risk of giving away details of their main credit card to identity thieves or scammers.