YOUR credit score plays an important role in getting you the best deals on credit cards, mortgages and more.
Luckily, if you have a poor rating, there are steps you can take to improve it.
Getty – Contributor A credit building card could help improve your credit score, but you need to use it in the right way
One way to do this is by getting a credit building card, which is designed to help you start building or repairing your credit report.
The idea is that by using them you can show you’re a responsible borrower and can pay off the money you’ve borrowed.
Yet there are a few things you need to be aware of before you apply, or it could actually do more damage than good.
If you’re already in lots of debt, think about if really you want to take out more credit – paying down your existing debts should be your priority.
Getty – Contributor You should never withdraw cash on your credit builder cards
Credit builder cards come with high interest rates and a lower credit limit than you would be offered on a “normal” credit card – so if you do get accepted you must try and clear the balance every month, or at least pay the minimum repayment.
Remember, the advertised annual percentage rate (APR) you see is just that – so you could still be accepted for a credit builder card but at an even higher rate.
And whatever you do, never withdraw money on them either. As well as being an expensive way of getting cash, lenders could view it as another sign of you struggling with your debts.
The best credit rebuilding cards
The credit cards could be a good option for some, so The Sun asked comparison website Moneyfacts for the best credit rebuilding cards currently on the market.
Below are the deals with the lowest rates. All cards come with maximum credit limits of £1,200.
Tandem Bank Journey Credit Card Mastercard – Apply Here
The Journey Credit Card by Tandem Bank comes with the lowest interest rates.
It has a monthly rate of 1.87 per cent or an APR of 24.90 per cent for purchases and cash withdrawals.
You’ll also be charged a fee of 2.5 per cent for each cash withdrawal in the UK, with a minimum charge of £2.50, while cash withdrawals abroad are free.
If you make a late payment or your direct debt fails, you’ll be hit with a £12 fee.
Barclaycard Platinum 18 Month Balance Transfer Visa – Apply Here
This credit card by Barclaycard comes with the same monthly rate and purchase rate as Tandem Bank’s, but it has a slightly higher cash withdrawal rate of 27.90 per cent.
But you get interest-free purchases for the first three months and you won’t have to pay any interest on balance transfers for 18 months, although a 2.99 per cent fee applies.
Just keep in mind you need to make your transfers within the first 60 days to enjoy the offer.
Alternatives to credit builder cardsIF you want to improve your credit rating without resorting to a credit builder card, you could consider a pre-paid credit repair card. These cards typically charge a monthly fee but are a good budgeting tool.
Alternatively, you might consider services such as Loqbox, which lets you save money monthly in a way that helps build your credit score.
You can also show lenders that you can manage credit well by taking out a mobile phone contract or household utility bill and paying in full and on time.
Tesco Bank Foundation Clubcard Credit Card Mastercard – Apply Here
Tesco Bank’s Foundation card comes with a monthly rate of 2.05 per cent, a purchase APR of 27.50 per cent as well as an interest rate of 39.94 per cent for cash withdrawals.
You can collect Tesco Clubcard points with your card wherever you see the Mastercard logo – you’ll get one Clubcard point for every £4 spent in Tesco and one point for every £8 spent outside Tesco in each purchase.
To get the card you cannot already hold another Tesco Bank credit card.
The Chrome card by Vanquis Bank comes with a monthly rate of 2.18 per cent, as well as an APR for both cash withdrawals and purchases of 29.50 per cent.
Be careful not to make unnecessary card withdrawals as it comes with a fee of up to three per cent at a minimum of £3.
With this card you can build up a credit limit of up to £4,000 as long as you make your repayments on time.
How to find out if you’ll be accepted
Like all credit cards – applying for one will leave a mark on your credit file.
But by using an online eligibility checker, you’ll get a better idea of your chances of getting accepted or whether it’s likely you’ll be given a higher interest rate.
Comparison website Money.co.uk and consumer site MoneySavingExpert both have online calculators which you can use to see which cards you’re most likely to be accepted for, without affecting your score.
Your lender may also offer an eligibility checker – just make sure that you’re not subject to a credit check, as it could damage your credit score.
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Rachel Springall, finance expert of Moneyfacts, said: “Credit repair cards are not just designed for those with a bad credit history, but also those who don’t have a financial footprint built up.
“Borrowers need to make sure they watch their credit limits as a card provider may increase these more than once, and reduce them if it becomes excessive.
“Above all else, the number one rule is to never miss a card repayment as it can damage their credit score.
How to cut the cost of your debtBEING in large amounts of credit card debt can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport.If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
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