The U.K. offers a thriving sub prime market in products designed for those with bad credit. A number of products are marketed with the aim of improving bad credit, but on the whole the market caters to those who require credit at any price. CCJ’s, IVA’s, defaults, and even bankruptcies, are no barrier to obtaining credit, but it can come at a high price with eye watering interest rates.
Anyone who has been foiled in their attempt to open a traditional bank account may wish to consider one of the available basic bank accounts for bad credit. They offer a way to establish a banking history and thus transition to a regular bank account. The three main providers in the U.K. are Card One Banking, the Secure Trust Bank and the Thinking Bank. Fees are levied and generally there is no access to cheques, and pre paid cards are available in place of standard debit cards.
Home credit, otherwise known as doorstep lending, is the mainstay of those with no access to bank accounts. It is particularly dominant sector for those who would never be welcomed by traditional lenders. Interest rates on home credit loans are in the region of 400% to 600%, and those tempted to use them should compare available rates through Lenders Compared Org. U.K. to secure the lowest rates.
Pay day loans are another avenue for those with bad credit and can be authorised without the need for a credit check. Although much reviled as an expensive option they do have their place, often working out far less in a one off fee than the interest levied on some of the credit cards designed for bad credit. Ideal use of pay day loans is to use them to cover the expense of a one off emergency, rather than to rely on them regularly.
Credit cards can be used to improve ones credit score, but only if they are used responsibly. There are a number of credit cards available in the U.K. for those with no credit or bad credit, including the Aqua Card, Vanquis card, and the Granite card. The cards come with low initial credit limits and interest rates which range from 19.94% to 69.94% dependant on current credit.
The Barclaycard Initial Visa and the Capital One Class Visa are preferable options as are available from mainstream lenders, thus boding well for a transition to lower interest rates if they are handled well. Failure to pay off the monthly balance in full on these cards can lead to an inevitable debt trap as the interest rates are very steep. For those who use them sensibly with the sole aim of rebuilding or establishing credit history they can be useful.
There is a distinct difference between using bad credit products to improve credit, and using them to facilitate borrowing which cannot be immediately repaid. Using bad credit products without the ability to clear the debt in a timely fashion is a certain way to see debt grow out of control and decrease the likelihood of returning to mainstream credit.