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Key takeaways
- The score needed to obtain a card varies significantly depending on the type of card and issuer. Standard cards may require lower scores, while premium cards typically need a good credit score of 700 or above.
- There are card options available for nearly every score range, including secured cards for those with poor scores, which can help raise your rating over time.
- A higher credit score generally results in better terms, such as lower interest rates, higher credit limits, and additional benefits.
To get a credit card, understanding your score is essential. This financial grade acts as a gateway to obtaining financial products and reflects your reliability as a borrower. This article provides a detailed guide on scores, what cards you’ll qualify for, and how you can raise your rating to get the card you want.
Jump to:
- Key Points: What credit card you qualify for
- What are the credit score ranges?
- What is the difference between FICO score and VantageScore?
- Can you get a credit card with limited or no credit history?
- How do lenders decide if I qualify for a credit card?
- Do pre-approvals hurt your credit score?
- How do I get pre-approved for a credit card?
- What information credit scores do not consider
- What factors impact your credit scores?
- FICO’s scoring method
- Cards for fair or average credit
- What are some things you should consider when selecting a credit card?
- How to improve your credit scores
- Credit-building cards can help brighten your financial future
- What are the different types of credit cards to build credit?
- Are there any specific credit cards that report to all credit bureaus?
- What is the recommended credit utilization ratio for building credit?
- Bottom Line
Key Points: What credit card you qualify for
What card you qualify for depends in large part on your score. Understanding the minimum credit score to get a credit card can help you target your applications more effectively and avoid unnecessary rejections.
If you have the lowest credit score of 300 or none at all, your best bet will be a secured credit card. Secured cards have very low minimum score requirements since you have to put down a security deposit, which reduces the lender’s risk.
If you don’t want to put down a security deposit to get a secured card you can look for subprime unsecured cards. These cards are designed for consumers with poor scores in mind.
Once your score reaches the fair range – anything above 580 – you’ll have more options. Get your score into the good realm – above 670 – and you’ll start to get offers for cards with cash back rewards, travel points, or 0% APR promotional offers.
What are the credit score ranges?
Credit scores from bureaus range from 300 to 850 on both the FICO and Vantage scoring models. These ranges help lenders assess your ability to repay money you borrow at a glance.
Here’s how FICO breaks down their scores.
- Excellent: 800-850
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
The lowest credit score is 300, a very rare score indeed. Poor scores like 300 are considered very risky and will make it hard to be approved for a card. Once your score hits the good range a wide range of card options become available.
What is the difference between FICO score and VantageScore?
FICO score and VantageScore are two scoring models that financial companies use to pull your score and determine whether or not to approve you.
FICO Score was introduced by the Fair Isaac Corporation in 1989 and has since become a standard measurement of consumer risk in the United States. It is used by over 90% of top lenders when making decisions.
VantageScore was developed as a joint venture by the three major credit bureaus Experian, TransUnion, and Equifax in 2006. The goal was to create a more consistent scoring model that could also provide scores for consumers who might be scoreable under one bureau’s system but not under others.
Both scoring models evaluate a consumer’s credit reports and assign a numerical score ranging from 300 to 850. The higher the score, the lower the risk. Both models consider payment history, debts, length of time you’ve had accounts, new inquiries, and types of accounts.
While both scoring models look at similar factors, there are a few key differences in how they weigh this information.
Learn more about scores on MoneyFor.
Can you get a credit card with limited or no credit history?
Obtaining a card can be challenging if your score is very low or nonexistent. Lenders typically look at your rating for proof of responsible financial management before approving applications. However, there are specific cards with low minimum score requirements that are designed to help people just starting out.
Secured cards are a prime option for those very low scores. These cards require a security deposit that typically serves as your credit limit. This deposit acts as collateral for the bank, significantly reducing the risk of to the issuer, which makes these cards easier to obtain. Over time, responsible use of a secured card, such as making purchases and paying the balance in full each month, can help enhance your score. After establishing a good score, you may be able to upgrade to an unsecured card and get your deposit back.
Not everyone has a few hundred dollars lying around for a secured card. In that case, your best bet is an unsecured card for a low score. Believe it or not, there are unsecured cards that accept applicants with very poor scores. Make sure you can afford the fees before you apply.
Want a credit card with a high limit?
How do lenders decide if I qualify for a credit card?
Lenders use a variety of factors to determine whether you qualify and what terms to offer. They will consider your report and score. These items provide data on your financial reliability and history of debt management. A history of on-time payments, low utilization, and a mix of account types bolsters your creditworthiness.
How much debt you currently carry impacts your utilization rate and debt-to-income ratio, both of which are crucial metrics for lenders. High levels of existing debt can be a red flag, indicating potential difficulties in managing additional borrowing.
The number of recent inquiries into your report can also affect a lender’s decision. Numerous inquiries might suggest you are in financial distress, seeking new accounts out of necessity rather than strategic financial planning.
Card issuers will also consider your income and employment history especially in setting your limit. They want to make sure you can afford their product. If you have a low income, they will likely give you a low limit. Include all your income on your application to increase your chances of securing a high limit.
Do pre-approvals hurt your credit score?
No, that is the beauty of being pre-approved. When you prequalify for a card the issuer will do a soft pull. Soft inquires do not affect your score. Hard inquiries will cause your score to temporarily dip by a few points. These happen when you submit a formal application. This is why it’s a good idea to prequalify for cards before you apply. You can then compare offers and only apply for the best card option.
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How do I get pre-approved for a credit card?
A lot of card issuers offer pre-approval on their website. Simply go online and fill out the form. You most likely will have to provide the following information:
- Personal Information: your full name, address, and sometimes your date of birth.
- Social Security Number (SSN): Most require at least the last four digits of your SSN to verify your identity and perform a soft pull.
- Income Information: Some issuers may ask for your income information to assess your ability to pay your balances. However, providing income information is often optional during the prequalification process.
After you fill out the form, the credit card issuer will do a soft inquiry to see if you qualify.
Being pre-approved does not guarantee that you will be approved but it shows your chances without hurting your score.
What information credit scores do not consider
Your score does not take into account all aspects of your financial life. It is only about how you handle borrowing money. Several important factors that scores do not consider are:
- Income
- Employment Status
- Savings and Assets
- Education Level
- Marital Status
- Age
These factors are relevant in the card application process because they provide a fuller picture of your financial stability and risk level. Although they do not directly affect your rating, lenders consider these elements alongside your score to make more informed lending decisions.
What factors impact your credit scores?
Your score is a reflection of your financial behavior. Lenders use it to assess how risky of a borrower you are. They look at your payment history, how much of your limit you use, how long you’ve had cards or loans, the types of credit accounts you have, and how often you apply. The idea is to see if you are reliable, can handle debt responsibly, and are not dependent on borrowing.
FICO’s scoring method
The FICO scoring model is the one most used by lenders. FICO scores range from 300 to 850 with higher being better. It calculates your score by analyzing the following five factors:
- Payment history – 35%
- Utilization rate – 30%
- Length of credit history – 15%
- Credit mix – 10%
- New inquiries – 10%
Credit scores do not have letter grades but you can think of them that way informally. Credit scores are similar to grades on a report card in that 800-850 can be seen as an A, 740-799 as a B, and all the way down to 300-579 as an F.
Cards for fair or average credit
Scores may be the most important factor when choosing a credit card. When you’ve reached fair credit score of 580 to 669 you will have access to a greater variety of cards. These cards can help you raise your rating. Here’s an overview of the options available and the key features to consider when selecting such cards.
Given the variety of options available, it’s crucial for borrowers to research and confirm if the credit range provided by the lender is legit and competitive.
What are some things you should consider when selecting a credit card?
How to choose a good credit card depends on your score and what you’re looking for. If your score is low and you want to improve it, your best option will be a secured card. If your score is high or at least good, then you may want to consider what type of perks you want. Are you looking for travel points, cash back rewards, or debt consolidation?
How to improve your credit scores
Improving your score is a critical step towards enhancing your financial stability and accessing better cards. It will take time and consistent effort but it is worth the work.
Monitor Your Credit Report and Score
Regularly monitoring your report and score is crucial for maintaining financial health. This practice can help you spot errors, identify fraudulent activities, and understand how your financial behavior influences your score.
Pay your bills on time
Consistently paying your bills on time is one the best thing you can do. Payment history is the most influential scoring factor. Set up reminders or automatic payments can help avoid late payments. Even one late payment will significantly hurt your score.
Credit-building cards can help brighten your financial future
Most subprime cards are specifically designed to help individuals establish or improve their scores. They are accessible to consumers with poor or fair scores and report your payment history and utilization. Make one to two small purchases a month and pay your bill in full and on time every month. You will see your rating rise.
A higher score gives you access to a wider range of financial products that cost less. You will be able to secure personal loans that don’t come with extremely high APRs and additional fees and cards with cash back rewards. In other words, a higher score means less expensive and more flexible borrowing options.
What are the different types of credit cards to build credit?
Various types of cards are designed specifically to help consumers improve their scores. You can go with a secured card that requires a cash deposit. Go2bank offers a one with a low $100 deposit requirement. This is arguably the most cost-effective option as the deposit is refundable if you close your account in good standing. If this doesn’t appeal to you, look for an unsecured card for your score range. There are plenty of subprime cards designed to help boost your score.
Looking for your perfect card?
Are there any specific credit cards that report to all credit bureaus?
The vast majority of card issuers report to all three major credit bureaus. It’s a good idea to double-check that the card you’re interested in does report to all three. It is only by reporting your payment history and utilization that your score will go up. If you’re starting from scratch with no credit history know that it might take about three to six months after getting a credit card to establish a credit score.
What is the recommended credit utilization ratio for building credit?
The recommended utilization rate is 30% or less of your limit. For example, if your total limit across all cards is $1,000, you should strive to keep your total outstanding balance under $300. Keeping it under $100 is even better.
Bottom Line
As you consider applying for a new card, it’s important to evaluate which ones you qualify for and how they align with your financial goals. Choose a card that offers the best benefits while helping you build or maintain your score. Whether it’s your first card, you want one to help improve your score, or you simply want to maintain a healthy rating, each decision should be made with an understanding of how it impacts your financial future.
