Credit Builder Cards Alternatives

You might not want to use a credit builder card. They have some disadvantages compared to other cards. Credit builder cards usually have high interest rates (APR) and a low credit limit. This means that if you make a mistake on your repayments, it could be very costly.

If you don’t want to get a credit builder card but you want to build credit there are credit builder card alternatives you can use.

• You can get a credit builder loan. A credit builder loan is essentially a loan you can’t touch until you have paid it off. A lender will put money aside for you and you’ll pay the balance back monthly. The best part about a credit builder loan is that the lender will return the total balance (sometimes including the interest paid) at the end of the term. Be careful as credit builder loans may have exit fees attached if you’d like to withdraw your money early.
  
  
• Use credit builder apps. Portify helps their members build credit without going into debt. They help build your credit score by reporting your monthly membership fee and loan repayments to Experian. The membership fees are on a 12 month contract and build positive repayment history. Positive repayment history is one of the largest factors that decides your credit score and users have seen scores increase by 100 points in three months.
  
  
• Get a prepaid card. Prepaid cards require funds to be preloaded or topped up making them a great option for those on a budget. They also don't require a credit check and are a good option for people with a poor credit score or no credit history. Many prepaid card providers allow for a ‘credit builder’ service to be added to help improve your credit rating. Make sure to ask providers and do your research when choosing this option!
  
  
• Report your rent payments to credit agencies. There are apps such as CreditLadder which enable you to report your rent to credit rating agencies.

Other Ways to Build Your Credit Score

There are some additional key ways you should look to improve your credit score.

• Fix any errors on your credit report. Download a free copy of your credit report and examine it carefully. You may find a negative marker on there such as a loan, CCJ or IVA that had nothing to do with you. Mistakes happen and markers sometimes show up on credit reports in error. Be sure to correct any errors on your credit report so it accurately reflects your financial situation and your score doesn’t suffer.
  
  
• Getting on the electoral roll could improve your credit score by up to 50 points. Registering to vote raises your credit score because it helps lenders confirm your identity.
  
  
• Budget carefully and pay off credit card debts. If you have multiple credit cards with outstanding balances it’s best to stop using them as much as possible and focus on paying off the debt. There are multiple debt repayment options you can use.
  
  
• Pay your bills on time. We mentioned this above but payment history is very important in deciding your credit score - therefore you should pay all your bills on time if you can.

Published: 24 November 2020