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Qualifying for a top rewards credit card is an important goal that many people make. According to the 2021 JD Power Credit Card Buying Study, rewards are the most important feature that influences American credit card selections. This is probably because many of the best rewards cards have the potential to unlock exciting opportunities, ranging from being able to earn free trips and monthly statement credits to firm cash back rewards.
Still, if you have fair credit, you might not qualify for the premium credit cards you want. However, the good news is that even with fair credit, you can still have solid credit card options available to you. And going forward, the right credit improvement plan could help you qualify for more attractive rewards credit cards in the future.
What is a fair credit score?
The credit scores that most credit card issuers use to predict risk are developed by one of two companies: FICO® or VantageScore Solutions. Although the two companies have developed several versions of their rating systems over the years, most of the credit scores used by lenders vary between 300 and 850. (Note: Some credit card issuers may use a rating range alternative from 250 to 900.)
According to Experian, this is what a fair credit score might look like:
- 580-669 FICO Score
- 601 to 660 VantageScore credit score
Of course, when it comes to interpreting the credit score (i.e. excellent, good, fair, and bad), each lender makes their own calls. The same goes for the minimum credit score qualification requirements. A credit card issuer can accept borrowers with a fair FICO score of 580 or higher. The next company might require you to have a score of at least 650 to qualify.
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Credit card options when you have fair credit
Before applying for a new credit card account or loan, it’s always wise to review your credit reports and credit scores to see where you stand. This information can guide you when you compare the available credit card options. And since every credit card request counts as a serious credit request, you don’t want to rack up more credit draws than you need to.
If you are looking for a new credit card when your credit score is correct, one of the following options may be right for you:
1. Apply for credit cards for fair credit
With a fair credit score, you probably won’t be able to qualify for the most competitive credit card offers from a card issuer. But you are in a better position than if you had bad credit.
Your choices may be more limited, but it is possible to find many consumer credit card deals with fair credit scores. Some of the credit cards in this category may even offer limited rewards and welcome bonuses. However, you will need to work on improving your credit score if your goal is to qualify for a premium credit card in the future.
2. Consider a Credit Union credit card
Another potential source for fair credit cards is a local or online credit union. Credit unions are non-profit financial institutions similar to banks. However, you usually need to become a member before you can open an account or apply for funding.
In some cases, credit unions can offer attractive credit cards to consumers with fair credit scores. Therefore, it may be worthwhile to include credit union credit cards in your research when comparing your available options.
3. Find authorized user status
It’s no secret that credit cards for good credit and great credit tend to be the most attractive types of credit card offers. So if you don’t want to settle for a fair credit card while you work to improve your credit score, you may want to consider becoming an authorized user on a loved one’s existing account.
There are several potential benefits of being an authorized user, including the ability to:
- Improved credit rating. If a loved one adds you to a well-run credit card with no past due history and low credit usage, the account can help when (and if) the card issuer asks credit bureaus. credit to add it to your credit report.
- Higher reward potential. Are you able to share a credit card with someone who you can also share rewards with (i.e. spouse, parent, significant other, etc.)? If so, putting your spending on a solid rewards card that you’re an authorized user on might make sense. Let’s say your spouse has a credit card that earns 3% cash back in some categories, but you can only qualify for a card with 1.5% cash back. You could get more for your money by becoming an authorized user and sharing the most competitive rewards card until your credit is in better shape.
Ways to improve a fair credit score
Because your credit score has such a big impact on your overall financial life, it is wise to work towards achieving the best score possible. But the process of improving a fair credit score may be a little different than creating credit from scratch or rebuilding bad credit.
1. Examine your credit reports and make a plan.
The best place to start any credit improvement process is a thorough review of your Equifax, TransUnion, and Experian credit reports. Your credit scores, after all, are based on the information in those three reports. So if you want these numbers to grow, you will need to make changes to the underlying data that influences them.
As you review your reports, make a list of any weaknesses you discover. Here are some examples of potential areas for improving your credit score.
- High credit card usage can dampen your credit score. But paying off your credit card balance could earn you an increase in your credit score. You can also try adding a credit card debt elimination strategy to possibly speed up or improve your efforts.
- Consider your credit mix. FICO bases 10% of your FICO® score on the mix of account types on your credit report. If your credit report only shows open credit card accounts, adding an installment loan to the mix might help, and vice versa. If you are considering applying for an installment account, a credit loan can be a good place to start. This type of account gives you the opportunity to build up credit without getting into too much debt.
- Credit errors can hurt your credit score. When negative information appears on your credit report, it can adversely affect your credit score. This fact is true whether this negative information is correct or not. According to a June 2021 survey by Consumer Reports, 34% of respondents found at least one error on their credit reports. If you discover any errors in the credit reports, it is important to dispute them with the credit bureau or the responsible creditor.
2. Consider out-of-the-box approaches.
Responsible use of credit cards has the potential to improve the credit scores of many consumers. But if you already have a good credit score, you may have already taken some initial credit building steps, such as opening a secured credit card or a starter credit card. If you are looking for other ways to improve your scores, you may want to consider some out-of-the-box strategies.
- Experience boost: Experian Boost is a free service available from the Experian credit reporting agency. When you enroll in the program, you authorize Experian to connect to your bank or credit card account. Experian will then comb through your payment history to find eligible transactions – that is, on-time payments to utility providers, cell phone providers, or streaming services. If you have qualifying accounts, the program will add them to your Experian credit report and your score may increase in return. According to the credit bureau, 60% of Experian Boost users see their FICO® score increase. (Note: Experian Boost is unable to improve your credit scores based on Equifax or TransUnion.)
- Authorized user status: In addition to the benefits mentioned above, becoming an authorized user can help you increase your average credit age. Credit scoring models like FICO and VantageScore take into account the average age of accounts on your credit report. The older it is, the better it is when it comes to your credit score. If you become an authorized user on a credit card that has been open for a while, this may give your credit score an extra boost.
At the end of the line
Improving credit takes time. And, in many cases, it’s more difficult to go from a fair credit rating to a good one than it is to go from a bad credit rating to a good one.
As you climb the credit score mountain, remember to stick to the good habits that got you here. Payments on time are essential for anyone who wants to earn and maintain a good credit rating. It is also wise to monitor your credit card balances and their impact on your credit utilization rate. (Remember, a low credit card balance / limit ratio is your friend.)
Finally, you may need to be patient. As time goes on and you avoid common credit score mistakes, you should be in a good position to see gradual improvements in your credit score.