Credit Building
11 min read

Navigating the World of Credit Cards for Fair Credit: A UK Guide

Michael Chen · Credit Card Specialist

Having a fair credit score can feel like you're stuck in a financial no-man's land. You're not quite in the "excellent" category, but you're also far from being labelled "bad". This is a common scenario for many in the UK, and it often leaves people wondering about their options, particularly when it comes to accessing credit cards. The good news is that there are credit cards for fair credit designed to cater to this specific situation. This guide will delve into the details of these cards, helping you understand your choices, make informed decisions, and ultimately improve your financial standing.

Understanding Fair Credit in the UK

Before diving into specific credit card options, let's clarify what “fair credit” means in the UK context. Credit scores in the UK are typically provided by three main Credit Reference Agencies (CRAs): Experian, Equifax, and TransUnion. Each agency uses slightly different scoring ranges, but generally, a score in the "fair" category typically sits somewhere in the middle of the scale. This means you might not have a pristine credit history, perhaps having missed a payment or two in the past, but you also don’t have a long history of significant defaults or county court judgements (CCJs).

How is a Fair Credit Score Defined?

It’s crucial to understand that there’s no universal “fair” score; each CRA defines it differently.

  • Experian: A score between 881 and 960 out of a possible 999 might be considered fair.
  • Equifax: A fair credit score could range from around 380 to 419 out of 700.
  • TransUnion: Scores between 566 to 603 out of 710 often indicate fair credit.

These numbers are guides; the exact cut-offs can vary. It’s more helpful to understand the factors that contribute to this ranking. Factors such as payment history, credit utilisation, length of credit history, types of credit used and any recent applications will all influence your rating.

Why Credit Score Matters for Credit Cards

Your credit score is a key determinant when you apply for credit cards. Lenders use it to gauge the risk involved in lending to you. A fair credit score signals to lenders that you may be a moderate risk. This usually means that while you might not qualify for the best interest rates or the most lucrative rewards programs, you still have access to a variety of credit cards for fair credit.

In the UK, having a "fair" score according to the CRAs typically translates to accessing higher interest rate cards with lower credit limits compared to people with "excellent" credit scores. The difference in terms of APR can be significant and can cost you quite a bit if you carry a balance. However, using these cards responsibly can improve your credit rating.

Types of Credit Cards for Fair Credit

Once you understand where you stand credit-wise, the next step is exploring the types of credit cards for fair credit available in the UK. These generally fall into a few key categories:

Credit Builder Cards

These are specifically designed for individuals looking to improve their credit score. Credit builder cards typically have higher interest rates but offer the chance to demonstrate responsible credit usage. They usually have lower credit limits, reflecting the lender's assessment of higher risk. Some prominent examples in the UK market include:

  • Capital One Classic Card: Often cited as a good starting point for those with fair credit, it provides a manageable credit limit and the opportunity to build credit.
  • Vanquis Credit Card: Another popular option, Vanquis offers cards aimed at those looking to improve their credit score, with a focus on making payments on time.
  • Aqua Classic Card: This card is similar to the others and is also designed to help those with fair credit.

These cards are a good option if you've had a few missteps with your finances, offering a chance to gradually demonstrate you're a reliable borrower. By making on-time payments and keeping your credit utilisation low, you can positively impact your credit score.

Cards with Higher Interest Rates

While not specifically designed for credit building, some credit cards for fair credit tend to have higher interest rates. This is often due to the increased risk that lenders perceive in those with fair credit. They may offer slightly higher credit limits compared to pure credit builder cards, but the higher interest rates are important to consider:

  • Cards offered by some of the high street banks, where if your current account relationship is good they may extend you a credit card option, even if your overall credit score is fair.

It’s essential to be disciplined with these types of cards, as failing to pay off the balance in full each month can lead to significant interest charges that can impact you financially.

Low-Limit Cards

These are credit cards for fair credit that come with lower credit limits, which can be a good thing. Lenders limit exposure to risk, while cardholders are not exposed to as much potential debt. This is especially useful for those who are new to credit or who have had trouble managing it in the past. Low limits also offer great control and can be a useful option while trying to improve your overall credit rating.

Key Features to Consider

When comparing credit cards for fair credit, it's important to consider several features to make sure you're getting the best deal for your individual circumstances:

APR (Annual Percentage Rate)

This is the cost of borrowing money over a year, and it's often the main focus for people seeking credit cards. For fair credit, the APR will likely be higher compared to those with excellent scores. Compare multiple cards to find the lowest possible rate you qualify for. Remember, the APR is not the same as the interest you pay if you settle your card monthly.

Credit Limit

This is the maximum amount you can borrow. Credit cards for fair credit often come with lower limits, which can be a good thing for building better credit habits. It also reduces the likelihood of overspending and therefore can be useful in avoiding debt. You can often seek a credit limit increase after a period of reliable use.

Fees

Pay attention to any fees associated with the card. These may include annual fees, late payment fees, over-limit fees and foreign transaction fees. Some cards for fair credit may have more fees than others and these need to be considered as they affect the true cost of borrowing.

Rewards and Benefits

While it's uncommon for credit cards for fair credit to come with the same level of rewards as premium cards, some may offer a basic cashback program or small points rewards. Consider if the card has rewards or benefits, but make sure they don't distract you from what should be your focus - paying off your balance each month and improving your credit rating.

Eligibility Criteria

Each lender will have their own eligibility criteria, which will be based on a range of factors. These include your credit score, payment history, employment status, and income. It’s worth taking the time to check if you're likely to be eligible before you make an application. Multiple declined applications can negatively affect your credit rating.

How to Improve Your Chances of Approval

Securing credit cards for fair credit requires a few strategies. Here are some actionable tips:

Check Your Credit Report

Before applying for any card, obtain copies of your credit reports from all three major CRAs. Check for any errors or inconsistencies and correct them. This process can take a few weeks so plan accordingly if you intend to apply for credit soon. This is an important step in preparation for a credit card application.

Reduce Credit Utilisation

Credit utilisation refers to the percentage of your available credit that you are currently using. A high utilisation rate can negatively impact your score. Try to keep your credit utilisation below 30%. If you have existing cards with a high balance it would be useful to reduce these if possible.

Make On-Time Payments

Your payment history is one of the most crucial factors that lenders consider. Aim to make all your payments on time, every time. Setting up direct debits can help. Even a single missed payment can have a negative impact on your credit score.

Avoid Multiple Applications

Don’t apply for numerous cards in a short period. Each application is a “hard check” on your credit report and too many of these can lower your score. Research and choose carefully before applying.

Register on the Electoral Roll

Being registered on the electoral roll confirms your address and can positively impact your credit rating.

Choosing the Right Card for You

The best credit card for fair credit for you will depend on your individual needs and financial situation. Consider the following:

  • Do you need to rebuild your credit score, or is this a new card? If you need to rebuild your credit, a credit builder card may be the best option.
  • How likely are you to pay the balance in full each month? If you often carry a balance, focus on finding a card with the lowest possible APR.
  • What are you hoping to achieve with a credit card? Do you want to make purchases, or is this for credit building purposes?

Comparing UK Providers

Let’s look at some of the providers mentioned, and what they offer:

  • Capital One: Their Classic card is often considered a good option for people with fair credit, with the ability to check eligibility online. They focus on providing clear and transparent terms. The card doesn't offer many benefits but does offer a route to improving credit.
  • Vanquis: Vanquis specialises in providing credit cards for individuals with fair to bad credit. They are known for reasonable acceptance rates and focusing on those looking to rebuild. However, their interest rates tend to be high so payment in full each month is essential.
  • Aqua: Another popular provider in the "fair credit" space, Aqua cards tend to offer credit limits that are a little higher compared to some of the other specialist cards, but you may not be eligible to apply for the highest credit limit available.

Keep in mind that the specific terms and conditions, as well as acceptance criteria, for these cards will vary from person to person. Research and compare them thoroughly before you apply.

The Importance of Responsible Credit Use

Regardless of the type of credit card for fair credit you choose, responsible use is paramount. This means:

  • Paying your balance in full each month: Avoid interest charges and keep your debt manageable.
  • Avoiding cash withdrawals: These are often treated as a separate transaction and may accrue charges at a higher rate than general purchases.
  • Keeping your credit utilisation low: Do not use more than 30% of your credit limit.
  • Monitoring your credit report: Regularly check for any issues and take appropriate action if needed.

Recent UK Statistics and Trends (2023-2024)

  • According to recent figures from UK Finance, there’s been an increase in the use of credit cards overall, driven by the cost of living crisis. This may also see an increase in people with fair credit rating using credit cards to manage their finances.
  • The average interest rate on credit cards in the UK has increased and this can have an impact if you carry a balance on your card.
  • Experian has reported that credit card default rates are slowly increasing, indicating people are struggling to keep up with payments. This highlights the need to only use credit within your means and to try and pay balances down in full if possible.
  • The number of applications for credit cards aimed at those with a fair credit score has risen, suggesting that more people are looking to improve their ratings.

These trends emphasize the need for responsible credit management and making informed decisions regarding which credit card is right for your circumstances.

Conclusion

Navigating the world of credit cards for fair credit can feel complex, but armed with the right information, you can make informed choices that benefit your financial situation. Remember to:

  • Understand what “fair credit” means in the UK context.
  • Explore different types of credit cards available, including credit builder cards.
  • Compare features like APR, credit limits, and fees.
  • Improve your chances of approval by checking your credit report and practicing responsible credit habits.
  • Choose the card that best suits your needs and circumstances.
  • Use your chosen card responsibly by paying your balance in full each month and keeping your credit utilisation low.

By taking a proactive and informed approach, you can access the credit you need and gradually improve your credit score, opening up new financial opportunities in the future. Remember that the journey to a better credit score is a marathon, not a sprint, so patience and diligence are key.