Credit Builder Credit Cards: How do they work?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
17th January 2022
2 minute read
While credit cards are viewed by many as an opportunity to protect your purchases or spread the cost of expenses, there are also options for those wanting to improve their credit score. Credit Builder Credit Cards can be used for just this purpose, designed to make the most of your regular spending by having a positive effect on your credit file.
By using your credit builder card, you can gradually increase your credit score, while avoiding further opportunities to get into more debt. If you plan on applying for a finance deal, getting a mortgage or borrowing money in the future, making improvements to your credit score in this way can be incredibly helpful.
To find out more about Credit Builder Credit Cards, keep reading our useful article below.
What is a credit builder credit card?
- Improve your credit score gradually
- Spend on your card and make regular payments every month
- Ideally clear your balance every month to avoid interest
- Always check terms and conditions
A credit builder credit card is designed for those who make frequent purchases and would like to improve their credit score at the same time. Every time you make a payment towards your credit card it puts a tick on your credit file, and by displaying you are able to pay back credit, this will translate to a steady increase in your credit score.
Improving your credit score will put you in a great position for the future, especially if you’re planning on buying your first home and you need a good or excellent credit score to be accepted for a mortgage. It can also come in handy for being accepted for credit, getting preferable rates on credit cards and for taking out finance deals.
How do credit builder credit cards work?
- Spend on your card every month
- Pay off your balance or make the minimum payment on time every month
- This will show you are able to borrow credit, putting a tick on your credit file
- Gradually your credit score will increase
Credit Builder cards work in the very act of you making regular payments and essentially handling the credit you have borrowed without missing payments. Having a string of payments will build up and translate to an increase in your credit score, which is good for your financial future.
The reason for improving your credit score via this method is usually down to having an existing low or poor score. This can be due to having previous issues with borrowing money, or it could even be due to having what’s called a ‘thin credit file’, which means you have very few accounts or have never borrowed money before.
Do credit builder cards work?
There are a number of credit builder products, which all work to improve your credit score, though it requires you to keep on top of your finances and ensure you are consistent in managing the card. A Credit Builder Credit Card works to steadily increase your credit score, as long as you continue to make payments every month.
If you miss payments to your credit card, or have issues with other debts, this can have the opposite effect, reducing your credit score instead.
Therefore, if you plan on using a credit builder card, understand that it will need to fit into your current spending habits and lifestyle. If you already have debts that need paying off, you might want to prioritise these before you start building up your credit score again.
Credit builder card eligibility
- Compare credit builder credit cards by checking if they fit with your circumstances
- Check your eligibility
- Apply for your rewards credit card when ready
Are you eligible for a credit builder credit card? Try our FREE online eligibility tool MoneyMatcher to find out whether you can apply today. Use the link below to get started.