If you have little to no credit history or if your credit score has suddenly dropped, a credit builder card may be able to help. It’s an option to look at to potentially help you build up your credit history.  But only if you manage the card in a responsible manner.

What is a credit builder card?

A credit builder card, as the name suggests, is aimed at doing exactly that. Helping people who need to build up a credit history from scratch or get their credit rating back on track after being refused credit.

How does it work?

It works in much the same way as a normal credit card;

• Make purchases on the card
• Pay off the balance or make the minimum payment on a monthly basis, including the appropriate interest and fees
• This will show you are borrowing credit in a responsible manner
• Gradually your score should increase 

A word of warning though - The T’s&C’s on credit-builder cards are likely to be much stricter than normal. And will often come with higher interest rates and lower credit limits. This helps lenders reduce the risk of losing money if you can’t pay them back

Who is for?

As already mentioned above it’s aimed at those who have little to no credit history. Examples of this include; if you're new to the UK, you’ve just turned 18 and haven’t had time to build up a credit record yet.  Or if you have a record of poor credit history and a low credit score.

Should I use it?

We can’t make that decision for you. That’s your choice but you do need to weigh up the pros and cons of having such a card and your situation. If you are going to get one then here are our top tips for managing your credit builder card;

• Pay the bills on time and avoid late payments as this could mean your charged a fee and your score could also be impacted.
• Pay in full every month to avoid paying interest on top. 
• Set up payment reminders/text alerts to ensure you don’t forget to pay on time
• Ideally set up a direct debit to make the monthly repayment as it hits your account
• Don’t go over your credit limit. The whole point of a builder card is to show you can borrow money responsibly 
• Keep your credit utilisation low, e.g if you continually use £340 of a £350 credit limit, it could be interpreted as a sign you are struggling financially.

Whatever you decide, it's about showing you can manage money in a responsible financial manner.