Need to rebuild a bad credit history? New ‘last resort’ option.

Former_MSE_Dan · 1 April 2008 at 7:08PM

1 April 2008

What’s this all about?

If you’ve got a poor credit history, or no history at all, it can be extremely difficult to get accepted for new credit, including loans, credit cards and mortgages. Yet there’s a new ‘last resort’ solution to help repair a dodgy past; it costs £60, but if you’ve tried all the other ways then it is worth doing.

Before trying this last resort option

The classic credit rehabilitation tactic is to get a credit card for bad credit, which has lower acceptance criteria, but charges a hideous interest rate e.g. Barclaycard Initial, Capital One Classic Visa*, or Vanquis. Then, spend a little on it each month, making sure you always repay in full, meaning there’s no interest cost.

Once you’ve kept this up for a reasonable period, provided you haven't made a late payment or defaulted, the credit reference agencies have an improved picture of you as a customer, hopefully putting you in a better position to get some cheaper credit. See Your Credit Rating guide for more ways to improve your credit history.

If you've been rejected for those cards

Unfortunately, some people are rejected for cards like this too. And this is where the new solution comes in. For £5/month you can get a CashPlus Card* prepaid Mastercard.

Unlike a credit card, here you can only spend if you've loaded money on the card in advance, so there's no credit facility. Yet importantly there's no credit check needed to get it.

Sign up for its credit builder scheme

And this is the bit no other card offers. Once you've been accepted for the card, opt for its Credit Builder option (you'll see details on the top left of the CashPlus page).

This means that the standard £4.95 monthly fee, now counts as a monthly loan repaying £59.40 a year interest-free. And thus this is then reported back to credit reference agency Experian you are correctly paying it.

It should show on your credit history as a fully repaid loan agreement, making you a more attractive customer (to those companies who use Experian for credit scoring, which is the vast majority of them) and hopefully meaning you can apply for better credit card and loan deals.

The only negative, of course, is that where just applying for and paying off a credit card in full is free, this costs £60 a year.

Will I definitely get it?

There is no credit check required, so all you need to do is provide identification, prove that you are resident in the UK and that you’re over 18.

What happens after a year?

The interest-free loans are over a year, at which point Experian gets told you’ve fully repaid it. At that point, consider whether you want the card for another year (costing another £60), or whether to try to get a credit card and cancel the prepaid card.

Don’t just leave the card open if you don’t need it any more, as it’s a waste of cash.

Is the card any good as a prepaid?

If we were doing a review purely on prepay cards (and we'll be publishing a full guide to the best in the next few weeks) it wouldn't do that well because it charges a monthly fee.

Yet in this case, as you have to pay the fee anyway, once you've got the card, it's not such a bad deal. Therefore as if you have a bad credit history, you're unlikely to have any plastic, you could use this card as a way to buy things online (and thus access the cheaper prices there).

If you want to top up the card, you can do so at Post Offices for free.

A MAJOR WARNING.

If you opt for this system NEVER EVER EVER miss one of the monthly payments. Ensure you're organised, as if you do the miss would be reported to the credit agency, leaving you in a worse position than when you started.

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You shouldn't notice any difference, the links don't impact the product at all and the editorial line (the things we write) is NEVR impacted by the revenue. If it isn't possible to get an affiliate link for the best product, it is still recommended and included. The following capitalone.co.uk, mycashplus.co.uk are identical unaffiliated links provided for the sake of transparency. Click on the following link for more details on how this site is financed.

orangemollie · 2 April 2008 at 1:40PM

This is quite interesting… Although it costs £4.95 per month, that is to enable FREE use of the cashplus card for purchase transactions etc.
I already have a cashplus card and have used one for a while. I simply added credit builder, so I still pay a single payment of £4.95 per month as before, but I have committed for 12 months. In return my payment history is reported to Experian.
So, other than committing to have a card for 12 months, its no different!
I have no idea if it will make much difference to my score, but will let you know!
There is more information on credit builder and the cashplus card here:

http://www.what-prepaid-card.co.uk/cashplus-creditbuilder/creditbuilder-loan.html

http://www.what-prepaid-card.co.uk/uk-prepaid-cards/cashplus-mastercard-gold.html

pa49 · 2 April 2008 at 2:20PM

The CashPlus card is also acceptable in those circumstances when entering into a contract (as in mobile phone). If asked whether you have a credit card the CashPlus card is taken as such.
This allowed me to obtain a contract phone when I had been previously declined.
It was also part of the ID info that I supplied when applying for a 'full' bank account with Abbey. I could only get a basic account before and the customer advisor told me that holding a 'Credit Card' did indeed score me points enough to qualify.
Makes you feel like a member of the human race once more.

hulltrucker · 2 April 2008 at 4:45PM

Thanks Dan - have been hoping MSE would do a review of pre paid cards as I have been thinking about getting one for use where my Electron card isnt accepted. As a discharged Bankrupt it's impossible to get any sort of credit card (unless anyone knows different?) - which isn't a bad thing as like most people who have been through bankruptcy I have no desire to utilise credit ever again - but without a Credit (or Visa Debit) card you cant: Book a travelodge room, shop on line at M&s, shop on line at John Lewis, pay by card at Holland & Barrett, get a mobile phone contract .....etc etc

Not sure I want to pay £60 per year for one, and repairing my credit is unlikely but no doubt when your do the pre paid card review you will find an excellent deal for us!

skyrider007 · 2 April 2008 at 4:56PM

hulltrucker wrote: »

Thanks Dan - have been hoping MSE would do a review of pre paid cards as I have been thinking about getting one for use where my Electron card isnt accepted. As a discharged Bankrupt it's impossible to get any sort of credit card (unless anyone knows different?) - which isn't a bad thing as like most people who have been through bankruptcy I have no desire to utilise credit ever again - but without a Credit (or Visa Debit) card you cant: Book a travelodge room, shop on line at M&s, shop on line at John Lewis, pay by card at Holland & Barrett, get a mobile phone contract .....etc etc

Not sure I want to pay £60 per year for one, and repairing my credit is unlikely but no doubt when your do the pre paid card review you will find an excellent deal for us!

Get a CapitalOne Classic card or Cashplus.

justsayyes · 2 April 2008 at 6:17PM

Does the Cashplus/Creditbuilder report to Experian 12 months after you've signed up, when you've effectively paid the entire £60 "loan"? Or does it report your monthly repayment history every month from the get-go, just like a normal credit card? Does it only report to Experian or Equifax as well?

woodface7 · 3 April 2008 at 5:02PM

Do read the small print at http://www.mycashplus.co.uk/cashPlusDefault/TermsCond.pdf

including "ATM withdrawal UK £2.00...
Cash withdrawal (at bank) £3.00...
Cancellation (for refund of cash value in the Account) £10.00"

and "Card issue fee £9.95".

I'm not sure why neither the article or postings mention that fee. I assume the standard offering is free.

Term 2.5 says: To open your Account you will need to pay the relevant Card Issue Fee (not applicable for Registration Packs).

Justy · 3 April 2008 at 5:49PM

justsayyes wrote: »

Does the Cashplus/Creditbuilder report to Experian 12 months after you've signed up, when you've effectively paid the entire £60 "loan"? Or does it report your monthly repayment history every month from the get-go, just like a normal credit card? Does it only report to Experian or Equifax as well?

It's my understanding that they report it at the end of the 12 months, although I can't be quite sure as the wording is a bit ambiguous.

In effect that means in 12 months you will get one 'green 0' against your name as opposed to 12 'green 0s' (one every month).

I might be wrong but that's the impression I get. Probably best to give them a ring and ask.

I already have the card but without the credit builder and would only bother signing up for it if it showed on my credit file that I was making payments every month. 12 months seems like a long time just to wait for one green zero for 60 quid.

justsayyes · 3 April 2008 at 5:59PM

Justy wrote: »

It's my understanding that they report it at the end of the 12 months, although I can't be quite sure as the wording is a bit ambiguous.

In effect that means in 12 months you will get one 'green 0' against your name as opposed to 12 'green 0s' (one every month).

I might be wrong but that's the impression I get. Probably best to give them a ring and ask.

I already have the card but without the credit builder and would only bother signing up for it if it showed on my credit file that I was making payments every month. 12 months seems like a long time just to wait for one green zero for 60 quid.

Right! If it's one green zero 12 months from now that's pretty pathetic...

EdNoman · 4 April 2008 at 12:15AM

http://www.mycreditbuilder.co.uk/faq.htm

"When is my credit rating updated?

We will report to the credit bureau that you have made successfully made three repayments of £4.95 after your third month on creditbuilder. All subsequent reporting of repayments will be made monthly."

ollieb_4 · 4 April 2008 at 9:47AM

Regarding experian and your credit rating, there was a recent thread on here explaining the difficulties in balancing a healthy credit score and managing your money by way of bouncing it from c.card to c.card taking advantage of 0% deals. I did this and in a reletively short timeframe my credit score plumeted from 900+ 'Excellent' to 450's 'Very poor.' I found this was because we are now penalised for having 'available' credit rather than owed credit or the classic missed payments....I was not happy with this. However, I decided to close off maybe 5 or 6 credit accounts (which is not always easy!), wait a while, and now my credit rating is again a healthy 981! this is all within 8 months.

Need to rebuild a bad credit history? New ‘last resort’ option.

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