What is a credit card?
A credit card is very similar to a debit card, except when you purchase items you’re borrowing moneyinstead of spending your own. You then get a monthly bill. If you don’t pay it all off on time, you’ll need to pay interest on the outstanding balance.
Why would I need a credit card?
Credit cards are a great way of building up a credit history if you don’t have one, or improving it if your credit history is poor. By frequently borrowing small amounts of money and paying it off on time, you’re demonstrating your reliability in paying off debts which will gradually push up your credit score. Because you’re only borrowing small amounts, as long as you budget well then this carries little risk to you.
How to apply for a credit card
Choose your card
There are so many different options it might be hard to know where to start, but if you’re applying for a credit card to improve your credit score then there’s really only one option – a credit builder credit card.
The clue is in the name – they’re designed for people who are looking to build (or improve) their credit score. Because they’re designed for ‘high risk’ people in the eyes of the bank, they typically have high interest rates and a low credit limit (the amount you can borrow at one time). But as long as you keep up with your repayments then you won’t need to pay the interest, and your credit limit may well be extended as your credit score improves.
There are a number of other things to consider when comparing providers, like APR (Annual Percentage Rate) and minimum repayment amounts. Read more advice on choosing a credit card.
Check your credit score
Your credit score will determine how likely you are to get approved for a credit score. Whilst credit builder credit cards are designed for people with poor credit history, there’s still a chance your application could get rejected. As a result it’s a good idea to check your credit score beforehand to see what your chances are, not least because the application itself will leave a mark on your credit file so you really only want to apply if you’ve got a good chance of getting approved.
Read about how to check your credit score.
You can also reduce your chances of being rejected by using an eligibility checker. That way you can check what your chances are of being approved for various different types of credit cards, in a way that won’t affect your credit history.
Fill in the application form
Most places will allow you to apply online. If you don’t want to you can usually apply over the phone or by going into the bank, but bear in mind that some places might offer particularly good deals exclusively online.
Answer the questions as honestly as you can, and give as much detail as you’re able to. If you have any questions during the process the bank should be able to help.
What happens then?
If your application is approved, good for you! You don’t need to do anything else – your card should arrive in 10-14 days, although your bank might give a different estimate.
If it’s rejected you can get a copy of your credit file to find out why. If it’s something you can change then you can make the change and then reapply. But if you can’t change it, or you don’t know why your application was rejected, don’t just apply for another one as this will negatively affect your credit score. Multiple applications for credit are a red flag, so don’t cause damage whilst you’re trying to improve your score! There are other ways you can improve your credit score, and you can then reapply once your score is a little better.
Getting a credit card is a big step in the journey to improving your credit score, but as the application will show up on your credit file it must be done correctly. Make sure you’re prepared financially and if you have any queries about the process it’s best to seek advice from your bank.