What Credit Card Should I Get If I Have Bad Credit in UK?
Having a poor credit rating drastically reduces your cash flow and liquidity; however there are a few options available to you. A major caveat in selecting one of these card options is the hefty fees and the potential for them to do more harm than good. If you’ve want a credit card, bad credit can be a problem. However, bad credit, credit card solutions are available and are great for online purchases. however, if you foresee yourself getting into more long term debt, perhaps try and live below your means first and avoid the use of these debt instruments further.
Before the credit crunch, most companies weren’t terribly fussy about who they lent money to, giving out large lines of credit to anyone who wanted it. However now that we’ve got pressure on who is credit worthy, the financial institutions are a lot more picky. The banks in particular have had a lot of trouble with forfeits and people not repaying their debts and being forced to foreclose their properties or just not getting the money at all! This has meant the banks have had to really tighten their lending policies and have started requesting people with better credit ratings and offering less credit to people.
A Comparison of bad credit options
In spite of tighter lending policies, there are still a few options available to you if your credit rating is poor. Fundamentally the easiest way to borrow money is to improve your credit rating and make it easier for the banks to approve you. As a first step consider calculating your total debt and figure out how long it might take you to repay your debts. There are several debt repayment calculators available online which are free to use and enable you to create a free repayment schedule. As a second step consider these 4 options:
Option 1: Bad Credit Credit Cards
In spite of the slightly alarming name, they’re not actually ‘bad’ (although they’re not great), instead this phrase refers to credit cards for people with bad credit. Often the credit limit is a lot lower than a normal credit card and since these cards are designed for people with high credit risk, they also come with larger fees, larger minimum payments, higher rates and fewer benefits. Still, if you really need the card, this is one option. You can still compare the different rates of these cards although do consider your purchases before making them with the card. Ask yourself if you actually have the money and can repay it.
Option 2: Prepaid credit cards
Prepaid credit cards rely exclusively on money you’ve transferred onto the card before your purchases, they’re not actually credit cards in the traditional sense, although they do use the same payment facilities as normal credit cards. This is a great way to manage your expenditure (it’s impossible for you to get into debt), while giving you the opportunity to rebuild your credit rating. This is the ideal card if you have bad credit as you can improve your credit rating and avoid further debt!
Option 3: Additional cardholder
If you’ve got a loved one with a good credit rating who’s willing to help you get back on your feet, consider asking them if you can be an additional cardholder on a credit card. Be warned though, if you mess up, the debt will be against their name as well as yours.
Option 4: Store Cards
Store cards generally have less stringent requirements than normal credit cards. This is offset by the generally high APR, as well as restrictions on use (You can only really use them at their store). This is a pretty bad option, but it is an option.