Adverse credit? What can you do about it?

Credit cards have become an almost indispensable means of payment in the modern world. Despite fears about credit card security and identity theft, payments by plastic continue apace, with 31.6 million UK residents - just over two-thirds of the over-18 population - holding at least one credit or charge card, an increase of 14 million over the past 10 years.

Retailers such as Asda, WH Smith, PC World, Currys, Boots and Shell petrol stations, have now stopped accepting cheques, or are restricting their use. And if you want to shop on the internet you nearly always need a card to make payment.

But what if, like almost 20% of the UK adult population, you're unable to get a card because you don't have the right credit record?

Two main reasons for being turned down

There are two main reasons for being turned down. The first is that you have a poor credit record, perhaps for not paying your bills on time, or for getting into real trouble and having County Court Judgments (CCJs) issued against you for non-payment of debt.

The second reason is that you are such a paragon of financial responsibility that you have never borrowed money and simply have no credit record at all.

Anyone in the first category, who has got into financial difficulties and run up multiple debts, might be well advised to steer clear of credit cards. But, used in the right way, they can in fact be used to mend your credit history. You just have to play by the rules.

Too bad - but there is hope

If you have a history of unpaid bills and out-of-control debt, you can forget about getting one of the best deals. You are going to have to settle for one of the special cards for defaulters.

Unsurprisingly, anyone who is going to run the risk of taking on a previous defaulter is going to make you pay for it in terms of a low credit limit and a high interest rate.

The key to getting considered for the best deals is to have a good credit history recorded by the credit reference agencies: Experian, Equifax and CallCredit.

Are you careless?

If you're a careless repayer, and habitually forget to pay on time, expect to pay a few percentage points more in interest. If you have a default notice on your account an extra 10% would not be unusual, and many lenders won't lend to you at all.

Taking out one of these cards and making a point of always repaying your bills on time will create this history and eventually allow you to move on to a better offer.