What are credit rebuilding products and what are their benefits?

By Andy Webb
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Just been rejected because you’ve got a bad credit score? Well, it doesn’t have to stay that way.

There are a handful of cards and companies that claim to rebuild your credit history, and eventually improve your credit rating. But are they any good? We’ve taken a look.

Credit-building credit cards

You want a credit card, but you can’t get one because your credit score is too low, and the way to improve your score is to have a credit card! It might seem like catch-22, but there are specialist credit cards designed to help in this situation.

They’re often more accepting of things like County Court Judgements (CCJ) or defaults on debt. They’ll have relatively low credit limits (i.e. the amount you can spend) - but theses aren’t designed for a spending spree. It’s about showing you can manage credit.

Now, like all credit cards you get charged interest on any money you borrow on them. The trick with these cards is to make sure you pay off in full each month everything you spend. Use them well and bit by bit you’ll demonstrate that you’re a responsible borrower and help fix your low score.

Some even come with cashback, free vouchers or a few months of 0% spending. Handy extras if times are tough.

Of course, it works the other way. These cards often come with much higher rates of interest - think 30%  APR or higher - even up to 50% for some. Exceed your credit limit, miss a payment, or even just make the minimum, and you’ll be more likely to hurt your finances than help them.

Credit-building prepaid cards

If you can’t get one of the specialist credit-building credit cards, all is not lost. You can pay for a pre-paid credit-building card which you don’t need a credit check to apply for - meaning you won’t get rejected. These cards lend you some money for a year which you repay each month, with some charges on top.

The problem with them is there’s no guarantee they’ll make much of a difference. Money Saving Expert suggest they should be a “last resort”.

Remember, it’s not any old pre-paid card that does this. You need to get one which will send information to the credit reference agencies about your repayments.

For the best credit building and prepaid cards currently available, check out MoneySavingExpert.com.

Credit-building agencies

You’ll also see companies offering to help fix your credit score. Great! Except, they’re really charging you money to do things you could do yourself, such as talk to people you owe money to or have CCJs against you.

You’re far better off seeing what you can do on your own, and if you’re not very confident with it, seek some free debt advice from charities such as Step Change or Citizen Advice Bureaus. The Money Advice Service has a handy locator where you can enter your postcode to see what is available near you.

https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator.

Things you can do yourself

Even if you do decide to try one of the options above, the biggest impact you can have is through things you do yourself. Here are our top three things to do:

- Get yourself registered to vote. Being on the electoral register helps credit reference agencies identify you.

- Pay all your bills on time. Each time you’re late with a payment, it has a negative effect on your score. But pay on time and it shows you can manage your money.

- Check for errors on your credit reports. You might have the wrong address listed, be linked to an ex or old housemate, or even have debts you’ve forgotten about. Get them all sorted and you’ll start to see an improvement.

 

By Andy Webb

Andy is the money blogger behind Be Clever With Your Cash, as well as the editor of blogging network UK Money Bloggers. He's passionate about helping people get the most from their money, and a little bit addicted to yellow reduced stickers in supermarkets. You might also have seen Andy on TV talking about money matters as he's one of the money experts on BBC One's Right on the Money.

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