Fair Credit Score & Cards Explained
What is a fair credit score, what it means to have one, and how it changes.
When it comes to credit scores, the FICO scoring system is 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 actually 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 around 20% of people in the US have a FICO score that fits in 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 see him or her 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 think that you are likely to default on your loan, which leads to you getting rejected or having to pay higher interests.
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.
Even if the scoring systems are the same, your score can vary from one credit bureau to another.
That’s because lenders can provide different reports to the bureaus and at different time periods. Make sure to check your report with all of the three major credit reporting bureaus
to find out the actual value of your credit score.
What Determines Credit Score Value?
Most important factors that are used to calculate credit score 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 you have and how long
- The number of loans you currently have
- How recently you opened new accounts
All 3 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.
There are many ways you can get free credit scores. Lots of organizations give users a free credit check each year. Chances are you can land a couple of those if you do a bit of research.
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, you should make it a priority to fix it as soon as possible. A good credit score gives you various advantages and can make your life easier. On the other hand, fair and poor credit score make your life exponentially more difficult.
Lots of people take their credit scores for granted. We don’t understand just how important this number is until we get into trouble. Most people realize then how limiting bad credit scores are. Here are some of the benefit of having a good credit score:
- The better your score is, the faster you will be approved for important 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 Score 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 are late or missed payments.
Always make sure to set aside money each month for all the payments you need to make. Be punctual and set aside all the money in advance. If you can, set up automatic payments with your lender or your bank account.
Keep Your Credit Utilization Low
Credit utilization is the amount of credit that you currently owe. It’s a very important number, and it can determine how lenders see you. If you keep your credit utilization under 30%, then you will be considered as a more reliable user. However, ideally, your credit utilization should be under 10%.
One of the best ways to keep your credit utilization low is to look to get a higher credit limit. Work on increasing your limit, and you will find it easier to reach that magical 10%.
Avoid Hard Credit Checks
When applying for loans, a lot of lenders will do a hard credit check. These checks impact your credit score negatively and will lower it for a certain 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 nothing.
Don’t Apply for a Large Number of Accounts in a Short Time
Apart from the fact that applying for several accounts could mean multiple hard credit checks, your application will also be visible on your report. It means that if you apply for another loan in the future, the lender will see how many times you tried to apply and was rejected.
You can end up looking desperate or suspicious and get rejected even though you might be meeting all the requirements.
Make sure to let time pass between your applications for new accounts. Take at least 3 months until you apply for a new one. This way, you can make sure the lender doesn’t see lots of applications that can make you look unreliable.
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 interests, and over time you will lose a lot of money. Here are some general tips on how to use your credit card if you have a 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 actually help you do this. Make sure to check your options before choosing a card.
- Look for a card that will allow you to keep credit utilization really low. Sadly, most cards for fair credit have low credit limits, which is why you should make multiple small payments each month and nothing more.
- 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.
It isn’t necessary to make lots of payments using your credit card. In fact, you need only two or three per month. As long as you keep your balance and credit utilization low and make payments on time, you will leave a positive sign on your credit report each month. You don’t have to spend thousands of dollars each month on an account.
Things to Look for in a Fair Credit Card
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 interests are minimal, you can get a card with an annual fee. On the other hand, if a card has annual fees and other fees that directly affect you, avoid getting a card with an annual fee. (See cards without annual fee)
Rewards and 0% Interest
In your search chances are you are going to come across cards that have low interest rates and those that don’t but offer rewards. You can’t have it both ways. It’s important to figure out which one suits you best and which card is more manageable based on your spending habits.
If you plan on carrying a balance, no interest will be a good idea. On the other hand, if you use a certain service all the time and the rewards are tied to that business, going with the rewards card might be a better option. (See card offers with rewards programs)
Calculate the Numbers
Turn everything into dollars and calculate what it would be like to use a card. If we are talking about 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, check the monthly debt payments to suit you with the cards with 0% interest. Also, calculate the balance you will carry and what interests come and at which point. (See card offers with low APR)
Look for Cards That Offer Upgrades
A lot of credit card companies give upgrades that you can go through very quickly. 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 allow you to speed up the process and improve your credit score faster.
Make sure to double-check your credit score with multiple credit bureaus before you apply for a fair credit card. The differences between a fair and good credit can be really small, and a tiny mistake on a report could force you into a worse position.
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.
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.