Credit cards for bad credit: how do they work?


Credit cards for bad credit: how do they work?

Having a bad credit rating doesn’t necessarily mean all the doors to credit will be closed to you. You may still be able to access certain credit cards (as well as loans and other forms of borrowing) that have been designed for people who have got a less than perfect credit history. These types of credit cards are often labelled as credit cards for bad credit – but how do they work? 

What is “bad credit”?

Your credit history is the information that the credit reference agencies hold about you.  They record whether you have paid on time, late, or not at all, for every line of credit you have, as well as if you paid the right amount – not just financial products but even mobile phone contracts and payment monthly insurance. They keep those records for six years.  If you have missed repayments, or made partial or late payments over that period, these will all show on your credit history – this is what people mean by “bad credit”.

Rebuilding your damaged credit history

If you borrow responsibly on a credit card – which means using the card within the credit limit and paying back at least the minimum payment on time each month – then it could help you get your credit history back on track. Each month you do this is another “tick” on your credit history, because lenders like to see proof that you can borrow money and pay it back on time, as it reassures them that you will pay them any money they lend you back on time too.

Click here to find out how to improve your credit history in three months >

So, borrowing small amounts with a credit card is a helpful way to start repairing a poor credit history.

For example, a good way to kick things off is to apply for a credit card suited for people who have struggled with credit in the past – such as Ocean’s credit card for bad credit (representative APR 34.9%) – and make one or two small purchases on it, being sure to stay within your credit limit. If you set up a Direct Debit to make sure at least the minimum repayment is paid, you won’t have to worry about falling behind and your credit history will slowly start to repair. Ideally, try to repay your entire balance on time and in full each month, as if you do this you won’t pay any interest on your purchases.  

Credit cards for bad credit can also be used by people who have little or no credit history (because they are new to borrowing) to build up a good credit record.

Working your way up

In order for potential future lenders to view you as a good risk as a borrower, they’ll need to see some history of you managing credit well in the past. So once you prove you can borrow money responsibly and repay on time, you’ll gradually build yourself a good credit history which will open up more doors in terms of better deals on credit cards, loans and even mortgages.

Better deals on credit cards could mean a number of things, including 0% interest on purchases, cashback on your spending or store points to spend in supermarkets. But, the main thing is you should be able to access credit with lower APRs – which means the total cost of borrowing is cheaper.

Keep paying your balance off and your hard work will pay off in the end!


Although taking out a credit card can help to repair a damaged credit history, it will only help if you can comfortably afford to repay what you borrow. You should only really consider this route if you’re in a stable job or have a reliable source of income to cover what you spend each month.

Missing payments can result in further damage to your credit history, costly charges and reduce your chances of being accepted for any credit at all in the future.