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How do credit building cards work?

Credit building cards are specialised credit cards meant for people with limited or poor credit history. Because of this, these cards tend to have lower credit limits and higher annual percentage rates (APRs) compared to regular credit cards.

That’s OK: their primary purpose is to help you improve your credit score by showing responsible credit usage, like making repayments on time and staying within the credit limit. By using a credit-building card responsibly, you can slowly build a good credit history over time and increase your chances of getting better offers in the future.

What is the difference between a credit builder credit card and a regular credit card?

Credit builder cards are not different kinds of cards. They’re actually 100%, credit cards:

  • They’re issued by credit card companies like Mastercard or Visa;
  • You can use them in any store or website, or at an ATM;
  • And they come with a credit limit and charge interest rates and fees for your purchases.

How credit builder cards are different from regular credit cards is in how they help people with limited or bad credit build their credit history:

  • To apply for a credit building card, you always have to go through an eligibility checker. This helps you keep your credit file safe from having too many hard credit checks on it.
  • Almost everyone is eligible, as long as you don’t have too many CCJs or bankruptcies in your recent history.
  • They usually have a few tools to help you build your credit score, like reporting your payments to all credit reference agencies, rewarding you for making payments on time or showing you your credit score in the app.

Because credit-building credit cards are meant for people with bad credit, they also have:

  • Credit limits are much lower, usually ranging from £50 to £1,500, compared to regular credit cards, which can have limits of up to £10,000 or more. This is because the card provider needs to limit their risk in case you don’t pay your bills.
  • Much higher interest rates and fees. Credit builder cards have significantly higher annual percentage rates (APRs), often in the range of 25-35%, compared to regular credit cards, which can have APRs as low as 10-20%.
  • And almost no rewards, benefits, or cash back.

What is the difference between a credit-building credit card and a secured credit card?

Secured credit cards are another kind of credit card meant to help people build their credit score.

However, they’re pretty different from credit-building credit cards.

First, credit-building credit cards are unsecured, meaning they do not require a deposit or collateral to open the account. Secured credit cards require a security deposit, which acts as collateral and determines the credit limit.

Second, credit-building credit cards usually charge high-interest rates and have low limits to compensate for the risk. Secured cards tend to have lower interest rates because the risk is already covered by the deposit. Their limit also usually only depends on the deposit.

That’s where the differences end. Both credit-building credit cards and secured credit cards serve the same purpose – to help you build or rebuild your credit history by showing that you can make payments on time and manage debt well.

How long does it take to improve my credit score with a credit-building credit card?

It really depends on how well you manage your credit card, like paying your bill on time and staying under the credit limit (the lower the better).

When you first open a credit card, you might even see your credit score take a dip. Don’t worry; this is temporary and only because opening a new account reduces your average account age. Opening a new credit account also requires a hard credit check – too many of those can also hurt your credit score for a short while.

But with on-time payments and responsible behaviour, you should soon see some improvement. Experian, for example, recommends you stay under 25% of the credit card limit. So if your credit card limit is £1000, try to not have a balance of more than £250 at any given time.

In any case, building credit takes time and requires consistent, responsible behaviour from your side. Make sure to set Direct Debit so you don’t miss any repayments, stay under the 25% limit, and use the card primarily for regular, small purchases, like a utility bill or grocery shopping. You should see a real improvement within 12 to 18 months.

But if you want to avoid having to deal with high-interest rates and fees or you’re concerned you might go over the credit limit, try downloading a credit-building app like Wollit instead. Unlike a credit-building credit card, Wollit reports your monthly subscription as loan repayment, helping you rebuild your credit score without risking taking on more debt than you can manage.


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Terms apply. Results may vary. Improvements to your credit score are not guaranteed. Wollit Credit Builder plans are unregulated.