What are Cards for Fair Credit?
What is a fair credit score, what does it mean to have one, and how does it change?
When it comes to credit scores, the FICO scoring system is the most popular and reliable. A fair credit score on FICO ranges from 580 to 670. When you understand that the range can go from 300 and up to 850, it’s clear that a fair credit score is somewhere in the middle. However, it doesn’t mean that it’s a neutral score. It’s a negative one, and whenever some organization sees you have a score in this range, they will consider you a liability. Statistics show that approximately 20% of people in the US have a FICO score that falls into this category.
What Does it Mean to Have Fair Credit?
If a person has a credit score within the “fair range,” it means that all lenders will view them as a subprime borrower. This means that getting loans, mortgages, and credit cards will be more difficult. Even if they are approved, they will come with significantly worse terms. Having this kind of credit profile means that you are not an ideal borrower in the lender’s eyes. They believe that you are likely to default on your loan, which can result in rejection or higher interest rates.
Credit Scores are Always Changing
Credit scores are constantly changing. The difference between your current fair credit score and getting into the good credit zone might be a couple of payments you need to make on time. By being late with just two payments, you can drop your score by 80 points, and this can easily move you from the good credit category into the fair zone.
What Determines Credit Score Value?
The most important factors that are used to calculate credit scores and how reports are compiled.
Payment history plays the most important role in calculating your credit score value. Some other important factors include:
- The amount of credit you owe currently
- How many accounts do you have, and how long
- The number of loans you currently have
- How recently have you opened new accounts
All three major credit reporting bureaus – Experian, Equifax, and TransUnion – keep all this information. In some cases, some additional information can be included in the report. Late payments can be damaging to your credit score, and this is something you should look to avoid at all costs. What’s good about it all is that a fair score isn’t as bad as a poor credit score, and it can be repaired more easily. There are various credit cards you can get with solid terms and conditions to build your credit score and get into the green zone once again.
Why It’s Important to Have a Good Credit Score
How credit score affects you financially and your ability to get better loans.
If you have a fair credit score, it’s a good idea to prioritize fixing it as soon as possible. A good credit score offers numerous advantages and can make your life easier. On the other hand, fair and poor credit scores make your life exponentially more difficult. Lots of people take their credit scores for granted. We don’t truly understand the importance of this number until we get into trouble. Most people realize then how limiting bad credit scores are. Here are some of the benefits of having a good credit score:
- The better your score is, the faster you will be approved for essential things like credit cards, car loans, home mortgages, and so on.
- A good credit score means lower interest rates with credits and loans.
- You will be offered better car insurance deals, better premiums, and lower costs.
- A good credit score makes it easier to rent an apartment.
- The better your credit history and credit score, the higher credit limits, loans, and credits you will be able to get.
- You won’t be asked to make security deposits for various services.
Ways Credit Scores Can Be Improved
Most important tips for improving credit score.
Make Your Payments on Time
It’s all about being organized and responsible. The biggest stain you can have on your credit report is late or missed payments. Always set aside money each month for all the payments you need to make. Be punctual and set aside all the money in advance. If possible, set up automatic payments with your lender or through your bank account.
Keep Your Credit Utilization Low
Credit utilization is the amount of credit that you currently owe. It’s a significant number, and it can significantly impact how lenders perceive you. If you keep your credit utilization under 30%, then you will be considered a more reliable user. However, ideally, your credit utilization should be under 10%.
Avoid Hard Credit Checks
When applying for loans, many lenders will conduct a hard credit check. These checks can negatively impact your credit score and lower it for a specific period. This is why you should avoid applying for several loans with hard checks. Choose one that you will focus on and look to meet all the conditions so that you don’t affect your score for anything.
Don’t Apply for a Large Number of Accounts in a Short Time
Apart from the fact that applying for multiple accounts could result in numerous hard credit checks, your application will also be visible on your credit report. It means that if you apply for another loan in the future, the lender will see how many times you have tried to use and were rejected. You can end up looking desperate or suspicious and get rejected even though you might be meeting all the requirements.
Tips for Using a Fair Credit Card
Best practices to help you improve your credit score with a fair credit card.
Anyone who applies for fair credit cards should be looking to improve their credit score. If not, you will be stuck on the same level with high interest rates, and over time, you will lose a significant amount of money. Here are some general tips on how to use your credit card if you have fair credit:
- The primary use of your credit card should be to rebuild your credit. This is why you should look for a credit card that can help you do this. Be sure to compare your options before selecting a card.
- Look for a card that allows you to keep your credit utilization low. Sadly, most cards for fair credit have low credit limits, which is why it’s best to make multiple small payments each month rather than one large payment.
- Get a card that has an annual fee but minimizes membership costs. That’s how you can make one-time payments and use the card with good terms throughout the year.
- If you still have your old card, don’t close it. Keep using it for small payments and keep it tidy. Having two active accounts will only help you improve your credit faster.
Things to Look for in a Fair Credit Card
Annual Fees
Even though annual fees are the most prominent cost of these cards, it can be a good idea to have a card that has one. If all the other fees and interest rates are minimal, you can consider a card with an annual fee. On the other hand, if a card has annual fees or other fees that directly affect you, consider avoiding cards with annual fees. (See cards without an annual fee)
Rewards and 0% Interest
In your search, you are likely to come across cards that offer low interest rates and those that don’t but provide rewards instead. You can’t have it both ways. It’s essential to determine which one suits you best and which card is more manageable based on your spending habits. If you plan on carrying a balance, a no-interest option may be a good idea. On the other hand, if you use a particular service frequently and the rewards are tied to that business, opting for a rewards card might be a better choice. (See card offers with rewards programs)
Calculate the Numbers
Turn everything into dollars and calculate what it would be like to use a card. When considering reward cards, apply their earning rates to your personal spending habits. This is how you will learn how much you will earn or spend over a certain period. On the other hand, consider checking the monthly debt payments to suit you with cards that offer 0% interest. Also, calculate the balance you will carry, the interest that will accrue, and at what point. (See card offers with low APR)
Look for Cards That Offer Upgrades
Many credit card companies offer upgrades that can be completed quickly and easily. Even if your credit score hasn’t improved yet, you can prove to the company itself that you are a reliable consumer, and they can give you better interest, increase your credit limit, or give you additional rewards. These upgrades enable you to expedite the process and enhance your credit score more quickly.
You don’t want to get a card for fair credit if you really have good credit. At the same time, if you need very little to advance into the upper category, you can use your old card to do so and instantly get a card with better terms.
The Bottom Line
If you have fair credit, it’s not the end of the world. You can easily get approved for one of these cards on our list and start improving your credit score towards Good and Excellent Credit ratings.