Myth 1 – Lenders won’t lend to me with poor credit
Not necessarily true. They’re likely to just charge you higher interest.
There are many cards on the market designed for people with what could be called ‘bad credit’. Since they target a more risky demographic, these cards generally charge higher interest rates than most as well as offering shorter 0% deals.
That said, cards for bad credit can help you rebuild your credit score by proving that you can be a responsible borrower. By using them and always paying back your monthly balance on time you should improve your score over time.
So, if you have bad credit, finding the right card for you
and using it well can help you get back on your feet, credit-wise. That way you’ll get access to better cards in the future and through renewed focus on responsible borrowing, stay debt free.
Myth 2 – Serious defaults stay on my file forever
No they don’t, in time they’ll be forgotten.
Being made bankrupt isn’t the end of borrowing and there are some credit cards that will accept you even with a CCJ as recent as four years ago.
Three to four years after a bankruptcy or a CCJ, its effect on your credit profile will have diminished to the extent that you can probably get credit again. After six years, any past mistakes are wiped entirely from your credit file.
So don’t give up if you’ve recently fallen foul of credit. While you wait for those six years to pass you need to keep as active as possible by borrowing and paying back on time through whatever avenues are open to you. That way, when your credit file is free of big mistakes, you’ll have a stronger profile to go forward and borrow responsibly.
Myth 3 – I’m in debt, so I won’t get a credit card
Credit cards can actually help you get out of debt.
Credit cards that offer a balance transfer facility are there to help you transfer existing debts from interest-charging cards to one that charges you 0% over a set period of time. A small fee, in the region of 3% of the existing balance, is charged for moving your existing debt, but this can be more than offset by the savings you make on interest repayments.
If you have a bad credit record you might feel that you won’t get any help from credit cards – but you’d be wrong.
Many providers are willing to lend to people who have made poor borrowing choices in the past. To find these providers it’s best to run what’s called a ‘soft search’ eligibility check, in order to see which cards you are likely to be accepted for. If you have debt, this card should be in order to transfer your balance.
Myth 4 – I’ve been rejected, it’ll just happen again
Every lender has different criteria, so one rejection doesn’t mean you’ll be turned down by everyone.
Getting rejected for credit cards hurts your chances of getting accepted in future. It can indicate to lenders you are desperate for credit and since it’s applications that appear on your record and not rejections, people with more applications look to lenders like they could already have loads of credit available, making them riskier bets.
But it needn’t be this way. All providers and cards have different criteria for acceptance. If you’ve been rejected for one card then you could still be accepted by another.
Myth 5 – With bad credit, my card limit will be low
This is not always the case, but your credit limit should be manageable.
When lending to people with a poor credit history, providers usually compensate for the added risk by charging higher APRs. That way, if payments are missed they make more money off of you once you do pay back. These high interest rates are the big downside of borrowing for those with bad credit.
Credit limits are going to be lower as well of course. You won’t be getting the table-topping rates that card holders with strong credit ratings get, for example. But as long as you pay back your borrowing on time, having a card for those with bad credit is very similar to having a normal credit card.
And remember, all you have to do to avoid those nasty interest rates is not borrow beyond your means and pay your debts back on time. Simple.