What is a Credit Builder Card?

Credit builder cards do what they say on the tin - a credit card to build credit. They are designed for people who are unable to get credit by other means.  These cards are also known as ‘bad credit’ credit cards and they typically carry low credit limits and higher-than-average interest rates.

Your credit score is essentially a lenders’ way of assessing your financial stability and trustworthiness. Having a good credit score is very important if you ever plan on making a major purchase in life—buying a house,  renting a flat, getting a car loan, or even buying a smartphone. Using a credit builder card is one of many ways you can build your score up over time. We explain how credit builder cards work below. 

How Does a Credit Builder Card Work?

Once you make the decision to apply for a credit builder card, you might notice a brief dip in your credit score. However, as time passes, managing your credit builder card responsibly can help you build a positive credit history.

If you make all of your repayments in full and on time, and don’t overspend the credit limit, your record will start to look more reliable and trustworthy to lenders. As a result, you should see your credit score go up, and you may be able to access a higher credit limit.
If you want to build your credit score without getting into debt or paying high interest rates check out Portify’s credit builder, credit boost. 

A Word of Caution for Credit Builder Cards:

Credit builder cards can have high APR rates. This means you may end up paying more for any outstanding balances than you would a normal credit card. This is why it is of the utmost importance that you pay your credit builder card off in time, every time.

Here’s a checklist for properly managing a credit builder card:

• Avoid late payments, most credit card companies will charge a fee and some may even reduce your credit limit.
• Submit timely repayments and pay credit cards off in full every month to avoid paying interest and going into debt for longer.
• Make sure to always at least make the minimum repayment if you can’t pay the statement in full. Missing payments can bring serious harm to your credit score.
• Consider setting up direct debits to ensure you make monthly repayments on time.
• Get text or email alerts and sign up for mobile banking so you never miss a payment.

Published: 24 November 2020