'Bad Credit' Credit Cards Best cards for poor credit scorers

Applied for a credit card and been rejected? FREEZE! Assess why you've been knocked back, then either find cards that fit your profile or try to rebuild your credit rating using the top 'bad credit' credit card and always pay it off in full.

This is a full guide to that, plus how to avoid the dreaded rejection spiral, and improve your credit history.

Q. Why am I being rejected?

The financial crisis and recession that's followed has seen banks wildly change the way they decide to lend money. Essentially, they now want to take less risks with their cash. This means if you used to get credit cards fairly easily, you may now struggle.

Yet whether you get given new credit isn't a simple calculation based on how much you earn. Nor some mythical 'universal credit rating' or blacklist. Lenders 'score' you to predict your likely behaviour, but these scoring systems are never published and differ lender-to-lender, and product-to-product.

The whole game of credit scoring is a convoluted one. To understand how it works, and what the banks judge you on, read the full Credit Rating guide. Importantly always check the information held about you with the three credit reference agencies is correct, as this plays a big part in lenders' decisions (you can do it for free).

If you've been rejected by all and sundry, then it's likely you've got a poor credit score or a problem with your credit history. Conversely, if you've always been accepted in the past and just been rejected once, then it's possible you simply don't fit one particular card company's customer profile.

If you have had the interest rate you pay on an existing credit card increased, read the Ratejacking guide to rejecting credit card rate hikes.

Q. What to do when I'm rejected?

Crucially...

If you're rejected - STOP applying. First check your file's correct.
If it is, consider getting a special 'poor credit' card

Freeze! Apply for too many cards and receive multiple rejection letters in a short period and you could shoot your credit rating in the foot for years. This is the dreaded 'rejection spiral'!

If you haven't applied for a while, or have applied once and been knocked back, you should first check your file for free. Secondly, call lenders you plan to apply to in advance to check what kind of customer they're after.

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Q. How do I get a card to use?

Once you've worked out whether it was a one-off rejection or down to a poor credit score, you need to plan how to act next. If you need a card for borrowing (either a 0% card for new spending or a top balance transfer deal), use this quick three-step scheme:

Q. What's the best card to rebuild my score?

If you can't get a card with decent rates or special deals, it's time to look at rebuilding your credit rating. One of the best ways to do this is by getting the right sort of credit card.

By getting any kind of credit, and operating it perfectly (i.e never missing payments, always staying within limit), you can either build up a credit history from scratch, or remedy a tarnished one.

There are two main paths, depending on how bad your rating is in the first place. Before going any further though, there is a vital golden rule...

Strictly repay EVERY month, in FULL, so there's no interest cost.

Borrowing new debt on any of these cards will be hideously expensive and should be avoided at all costs. However, cleverly using one (or even two) of these cards for six to twelve months, spending a little every month and paying it off, can help clean up a muddied credit history, or build one from scratch.

Top spending cards for poor credit scorers

Alternative cards for rebuilding a bad credit rating

Card	Representative Variable APR	Notes
Aquacard*	35.9%	-
Vanquis*	39.9%	-
In order of representative APR but as you should avoid ever paying interest, the rate's not crucial. See all Official APR Examples

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Think before adding insurance

Payment protection insurance is commonly sold with credit cards - the idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

There have been a myriad of cases where it has been mis-sold, eg, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined.

The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.

Always be vigilant to check you aren't getting more than you bargained for when you fill in the application, then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.

Q. How else can I improve my chances?

While it's not an exact science, there are a number of specific things you can do as good practice to improve both your credit score and lenders' attitudes towards you. For an even more comprehensive list, read the full Credit Rating guide.

• Get on the electoral roll
  
  If you're not on the roll, it's unlikely you'll get any credit. Immediately check if you are by calling your council. If you aren't eligible to vote (mainly foreign nationals), send all the credit reference agencies proof of residency and ask them to add a note to your file.
• Keep up payments and never be late
  
  Always try to follow at least the minimum repayment plan for your financial products (though paying more is preferable, see the Minimum Repayments guide). Defaulting or missing payments could cause problems that can cost you for years (though you may get past charges back, see the Bank Charges Reclaiming article).
  
  If you are in difficulties, the cliche 'contact your lender' is a good one, as it should attempt to help. Changing your repayment schedule is preferable to defaulting - and though it will hit your credit score, it's better than a CCJ against you.
• Dealing with defaults on your file
  
  One of the major problems people face are past debt defaults. These can easily hamper applications for new credit and, if they're genuine and fair, are tough to deal with. There are a few things to try though, particularly if the default is unfair (read the Financial Fight Back guide).
  • Complain to the Ombudsman. First write to the company and complain the default isn't fair and lay out your terms. Ask it to wipe it from your file, which it can do if it's disputed. If that fails, complain to the Financial Ombudsman, the free independent arbiter of disputes, as it can rule that the default can be wiped.
  • Negotiate with the lender. If you are prepared to settle the debt, either in part or in full, then you can enter a negotiation with whomever you owe the money. This can include a condition of settlement that the default is wiped off your credit file. Companies are allowed to do this for disputed defaults.
  • Add a 'Notice of Correction'. If all else fails and you believe the default's justifiably unfair, add a notice of correction to the file explaining the problem, eg, "it was a joint account and the debt was run by my ex-husband/wife once I no longer had access".
    
    This will slow applications down, as most companies will look at it manually, but as a substantial default is likely to stop you getting credit anyway, that's usually not a problem, providing it helps.
• Cancel unused credit cards, debts and accounts
  
  Access to too much credit, even if it isn't used, can be a problem. If you have a range of unused credit cards, cancel most of them. This lowers your available credit and should help (see the Cancel Old Cards article for full info on what to close when).
  
  However long standing bank accounts with good credit histories can be a benefit to your credit score, so they're often best left open.