Credit builder cards

Build your credit history

Benjamin Taylor | Edited by Rosie Hamilton

Updated 20 August 2024

Accessing credit can be tricky for those with limited credit history. If you're saving for a house deposit or considering a large purchase, using a credit builder card can make your mortgage or loan application look more appealing to lenders. This guide runs through who's eligible for a credit builder card, and how you can use them to boost your credit score.

What are credit builder cards?

Credit builder cards are a type of credit card that can be used to improve your credit score. When you use a credit builder card you'll do exactly that: build (or rebuild) your reputation with lenders and credit reference agencies – increasing your chances of successfully applying for loans, better credit cards (and eventually, large credit products like mortgages).

If used properly, a credit builder credit card can improve your credit score within six(ish) months.

How do credit builder cards work?

When you use a credit builder card, you'll be showing your card provider and credit reference agencies how well you handle credit. Used correctly, these cards can improve your credit score by demonstrating how reliable you are.

When you use a credit builder card, it'll feel just the same as using any other credit card:

Each time you spend on your card, you borrow money from your credit provider, which you then should pay back each month.
You have a credit limit which is the maximum you can borrow.
Anything you don't pay back within a month you'll be charged interest on.

For more detail on how credit cards work, head to our full Credit card basics guide.

How do I use a credit builder card to improve my credit score?

To make the most out of your credit builder card, always follow our golden rules. Use the card effectively and it could lead to an improvement in your credit score after six(ish) months.

Pay off your balance IN FULL every month. That way you won't be charged any interest. If you can't afford to repay IN FULL, make sure you pay at least the minimum repayment.
Set up a Direct Debit to repay automatically each month. Usually you can choose whether you want to repay IN FULL, just the minimum balance, or a figure of your choice.
Never miss a payment. Missing payments can lead to extra fees, a reduction in your credit limit, and can severely damage your credit score.

See our full improving your creditworthiness guide for more info.

Are credit builder cards different to standard credit cards?

Yes, there are typically some key differences between credit builder cards and standard credit cards...

Credit builder cards usually have a much lower credit limit. This means means you'll be able to spend less on them, compared to a standard credit card.
Credit builder cards have much higher interest rates (APRs). This means you'll be charged more interest if you don't repay your balance IN FULL each month.
There aren't usually any nifty perks. Other credit cards often come with promotional offers, such as 0% periods for purchases or balance transfers, or cashback on spending.

It's important to understand that these cards are aimed at those who are brand new to borrowing, or those who've had debt problems in the past – so the cards as as bog-standard as they get. See below for more info on whether this type of card could be right for you.

Who are credit builder cards for?

Credit builder cards are a great option for those starting from scratch with their credit score and aren't eligible for standard credit cards. Credit builder cards are typically for:

Those who have no credit history and have never borrowed before.
Those whose income isn’t high enough to qualify for standard credit cards.
Those who've struggled with debt problems in the past. This includes if you've a track record of missed payments, have previously been declared bankrupt, have had a county court judgement (CCJ) against you.
Those who aren't on the electoral register.

How do I check my credit history?

Equifax, Experian and TransUnion hold credit reports on everyone in the UK. This information is available to you and any potential lender you might apply to. Luckily, you can check what info they hold for free, and we'd recommend checking with all three once a year to make sure your credit report is in good shape. Here's a step-by-step guide to checking your credit history:

Select any of the three credit referencing agencies — Equifax, Experian, or TransUnion.
Create an account or log in if you already have one.
Access your report and carefully review the details.
Repeat the process with the other two agencies to ensure consistency.
Dispute any inaccuracies and check your report annually.

You can also check your credit report by signing up to our completely free Credit Club, which provides a range of tools and calculators to give you a sense of how the financial world sees you.

Credit Club members can also get an Eligibility Rating which combines your credit score, affordability score and current market conditions. You can also check your acceptance odds for different credit cards using our eligibility calculator.

Pros and cons of credit builder cards

Credit builder cards are bog-standard credit cards that don't typically come with any perks. They're aimed at those who are brand new to borrowing. Here are the main pros and cons...

Pros	Cons
✔️ Easier to get than standard credit cards	⚠️ Low credit limits
✔️ Help you build or repair your credit score	⚠️ Higher interest rates
✔️ Encourage good credit habits	⚠️ Don't offer rewards or extra benefits

Am I eligible for a credit builder card?

Unfortunately, there's no guarantee you'll be accepted for a credit builder card: you'll still have to go through an application process and credit check. Lenders have varied and often secret ways of choosing which customers they want to lend to, though you're likely to be eligible if you...

Have a decent income and are in full-time employment.
Pay for other financial products such as a phone bill or rent.
Are over 18.

You'll also need some form of ID, a bank account and bank statement, plus proof of income. We go into more detail about how to apply, below.

Check whether you'll be eligible BEFORE you apply...

Using our eligibility calculator tool before you apply will show you which cards you have the best chance of getting. It only does a 'soft search', so it won't impact your credit report.

Once you know which cards you might be eligible for, you can also apply through the tool. Simply, choose the card which gives you the highest chance of acceptance, hit apply and it will take you to the provider's site.

What if I already have a credit card?

If you already have a credit card, the best thing you can do for your credit score is to use it. If you use the card well and pay it off in full every month, then it will boost your credit score as effectively as a credit builder card.

How do lenders decide who to lend to?

Lenders aren't always completely transparent on how and why they make decisions, but they tend to base acceptance on the type of customers they're hoping to attract (and those they would prefer to avoid).

When you apply for credit, the lender will go through information in your application, plus any past dealings you've had with the bank and come up with a credit report. This will often come down to their predictions on how you as a borrower might behave and how profitable you might be to them as a customer.

How to apply for a credit builder card

First things first, you should use our eligibility checker to check which cards you have a chance of being accepted for. Once you find a card that you have a decent chance of being accepted for, just click apply and you'll be taken to an online form on the provider's website.

The credit card provider will ask for some personal information, and you may have to provide some documents such as proof of address, bank statements, proof of salary and personal ID. They will then use this information to perform a credit check, which they will then use to determine whether or not to lend to you. For full info, see getting your first credit card.

Only apply for ONE card at a time

When you apply for a credit card the provider will do a credit check as part of the application process. This is recorded on your credit report as a 'hard search', which means other providers will be able to see it.

Applying for lots of cards at the same time can give the impression that you're desperate for credit and make it more likely that you'll be rejected, so only apply for just one product at a time.

Top credit builder cards

If you've never had a credit card before, it can be tricky to decide which one to go for. The best credit builder card for you will depend on your personal circumstances but, as a general rule, you should be looking for something with a low interest rate and reasonable credit limit.

Our eligibility checker shows your acceptance chances for many cards, including most of our top picks below. We've ordered these by perks, then by representative APR. Some of these cards sometimes have a 0% spending period, but unless you NEED to borrow (and if so, make sure you use the cards the right way – full details are in 0% spending), it's best to use these cards to spend a small amount and pay your card off in full each month to help build a good credit history.

Top credit-building cards for new cardholders

Tesco Bank Foundation	- Clubcard points on spending - 29.9% rep APR	Check eligibility
Tesco Bank Foundation	- Clubcard points on spending - 29.9% rep APR	Apply*
Asda Money Select	- Asda pounds on spending - 34.9% rep APR	Apply (not in our eligibility calc)
Post Office	- 29.9% rep APR	Check eligibility
Post Office	- 29.9% rep APR	Apply*
Virgin Money	- 29.9% rep APR	Check eligibility (i)

For more on APRs, see Official APR examples. (i) This provider has asked us to only link to our eligibility calculator.

Got a card? Make sure you use it right! Follow our golden rules...

Use your credit card for a small amount of everyday spending each month

Instead of using cash or a debit card for your normal everyday spending, start using the credit card. As a general rule try not to spend more than 30% of your limit (for example, if you're allowed to spend up to £100, try to only spend £30). This demonstrates to the credit card provider that you can use the credit responsibly – but you're not reliant on it.

While this may mean it looks like you have more money in your current account, remember you'll need this to pay your credit card bill at the end of the month. It can be helpful to move the amount to an easy access savings account (so you don't accidentally spend it) and then transfer it back before your credit card bill is due.
NEVER withdraw cash with your credit card

Don't be tempted to withdraw cash from an ATM with your credit card. It's not only expensive (often a fee for each withdrawal plus expensive ongoing interest) but repeated cash withdrawals are a red flag to lenders – they can make you look desperate for credit – so can harm your creditworthiness.
Repay IN FULL each month to avoid expensive interest

Most cards don't charge interest on spending (though cash withdrawals, usually attract interest from day one) if you pay the money back in full and on time, so this is the absolute best way to use your credit builder card.

Otherwise you'll be charged interest on your full balance (look out for the APR displayed for each card – the higher the number, the more expensive it will be).

However, there's a catch to watch out for. Some card firms could give you a higher interest rate than the one it uses to advertise the card, as only 51% of people accepted need to get this advertised APR.

So just because a card says it has a 34.9% representative APR, it doesn't mean that's the interest rate you'll get.
If you can't repay in full, always repay AT LEAST the minimum repayment on time

If you can't repay in full, you'll need to pay at least your 'minimum repayment'. This is the lowest amount you're allowed to pay each month to avoid a 'missed payment' mark being added to your credit report (and a late payment fee).

It's vital you make this minimum payment EVERY month. A missed payment mark will undo all the positive impact of your credit building efforts and make it more difficult to access financial products in the future.

We'd recommend setting up a monthly direct debit to automatically pay off the minimum amount (or a higher/the full amount if you can). If you know you won't be able to pay, contact your provider BEFORE the payment is due. It'll work with you to agree a different repayment plan.
Don't go off grid
It's important to keep your personal information up-to-date, including things like your address. This makes it easier for credit card companies to do their credit checks, and is an easy way to boost your credit score.

What can you buy with a credit builder credit card?

A credit builder credit card can be used to purchase most items and services, just like any other credit card. It could be anything ranging from everyday purchases such as food and other daily expenses, to online shopping, or meals at restaurants.

However, remember that credit builder cards aren't meant for long term borrowing, or spreading the cost of larger purchases. You'll get the maximum benefit when it is used for every spending, making sure to stay within the credit limit, and then paying off the balance in full every month.

Doing this for three to six months should give your credit score the boost you're looking for.

Been rejected? Don't panic - and don't apply again (yet)

Rejection can be disheartening, particularly when you're making your first credit applications. However, what you do now is just as important for you credit score as securing your first credit builder card.

Important. If you've been declined for a card, don't keep on applying for more.

You might think that applying for as many credit cards as possible would boost your chances of being accepted, but if you're rejected more than once in a short space of time, you can do real damage your credit score. So, if you've been rejected recently, you've now got two options:

Wait, then try again. It may be that you need time to heal your credit report, especially if you've made a lot of applications recently. So give it some time, then try the eligibility checker again, to see if you're likely now to get any cards.

Try the 'credit builder' product below. This option is fee-free if you open a free account at the end (if not, it's £30), plus it gets you into the habit of making 'repayments' each month, so could be worth a try.

If you can't get any credit card, try Loqbox

Loqbox*

Increase your savings and improve your credit history – if you're able to save £20-£200/mth for one year.

Cost: Free or £30

1. Choose a fixed amount to save every month for a year between £20 and £200. This is then charged each month to your debit card.

2. You then get a 0% loan from Loqbox for the yearly total (£240-£2,400), which you cannot access. There's no credit check, though this will appear on your credit report as a loan.

3. The fixed amount you've chosen to 'save' each month is then used to 'repay' the Loqbox loan over the course of the year. These payments will be reported to all three credit reference agencies.

4. By the year's end, you'll then have a fully repaid loan to show on your credit report, which should help increase your score. It won't cost you a thing, as you pay the same amount Loqbox loans you. Only catch is that to transfer the money into your existing bank account, it'll be £30. Though it's free if you open an account with a Loqbox partner bank such as TSB and NatWest. Loqbox claims most won't require a hard credit search, but be careful of choosing one that does.

Important: Never miss a monthly payment, or pay late. You can cancel your agreement with Loqbox within around five working days, so if you can't afford to keep saving – tell them. Failing to repay would leave you worse off than you started.

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