Key takeaways
- Your credit score affects the credit cards you can qualify for, as well as your ability to own or rent property, buy a car and get low insurance premiums
- There’s a card out there for just about any credit score — including average to poor credit — though cards with the strongest rewards and other perks are typically reserved for those with good to excellent credit.
- Know your credit score and compare it to the minimum requirements of cards you’re interested in before applying to keep hard pulls on your credit — and dings to your score — low.
- By understanding what goes into your score and practicing healthy financial habits, you can better position yourself for the best cards on the market.
Credit scores are an important part of your financial life that affect your ability to own or rent property, buy a car, access credit — even the premiums set by insurers. Financial institutions use this number to decide whether to lend you money and how much they will charge you for it.
If you’re holding off on applying for a credit card because you fear your credit score is too low, don’t fret. It’s true that a higher credit score means you can qualify for the best credit cards, but a low score doesn’t necessarily put all credit cards out of reach.
Let’s take a deeper look into what impacts your credit score, the credit score you need to qualify for different types of credit cards and how to build credit.
What credit score is needed for a credit card?
It depends on the card. Some credit cards are made specifically for people with less-than-excellent credit. Before you begin comparing specific cards, it helps to check your credit score and understand what that number means.
The two major scoring models are FICO and VantageScore.
- Poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Exceptional: 800 to 850
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 780 to 850
There’s a credit card out there for just about any credit score. But the cards available to lower-scoring consumers tend to offer few perks and high APRs.
Cards for fair or average credit
Even with a fair FICO credit score of 580 to 669, you can find plenty of solid fair-credit cards to choose from.
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- The Capital One Platinum Credit Card is a no-annual-fee credit card that allows cardholders to be automatically considered for a higher credit limit six months after account opening with on-time monthly payments. The Capital One Platinum doesn’t offer any rewards or noteworthy cardholder perks, but it’s a highly rated option if you have fair or average credit.
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- The Capital One QuicksilverOne Cash Rewards Credit Card offers a solid rewards program with a $39 annual fee. Cardholders can earn unlimited 1.5 percent cash back on all purchases, every day. This is a great option for those working to build their creditworthiness while also earning cash rewards.
Cards for good to excellent credit
For example, the Chase Sapphire Reserve® has excellent rewards potential and comes with multiple perks. But this card’s annual fee is $550, and it’s generally available only to those with excellent credit. Meanwhile, a typical no-annual-fee cash back card is likely accessible to anyone with good or very good credit.
The Discover it® Cash Back credit card is among the best no-annual-fee credit cards on the market. Cardholders earn 5 percent cash back on up to $1,500 in purchases each quarter on rotating categories after activation, and 1 percent thereafter. And the Discover it® Cash Back card requires only a good credit score to apply.
Did you know?
Can you get a credit card with limited or no credit history?
You’re not out of luck if you have a limited credit history. There are a few ways to get a credit card with limited or no credit, although it may involve some collateral. But everyone has to start somewhere, right?
Ways in which you can establish a credit history to generate a credit score include:
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- Apply for a student credit card. Student credit cards are designed with students who don’t have credit in mind. They offer an excellent way for young adults to start building credit while learning strong financial habits. Student cards typically come with noteworthy perks, such as student-centric rewards and no annual fees, yet regular APRs can run quite high.
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- Apply for a secured credit card. Secured credit cards offer consumers with poor or no credit access to a small line of credit in exchange for a one-time security deposit. The credit limit is often equal to the amount of the initial deposit. This route may be ideal if your main goal is building credit, rather than borrowing money.
What impacts your credit score?
The two major credit scoring models are FICO and VantageScore. Think of these models as equations: They each have their own ways of using your information to generate a numeric score.
Understanding how those scores are calculated can help you get to your desired score.
FICO’s scoring method
FICO scores are grouped into five categories, each contributing a different percentage to what makes up your credit score.
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Your payment history is the No. 1 factor in calculating your credit score. Your payment history tells issuers whether you’ve paid on time and as agreed. It also includes the number and severity of any late payments of 30, 60 or 90 days late, the amount past due and whether you eventually repaid your accounts. Paying on time, every time, will put you well on your way to earning a good score. But other factors are important, too.
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Credit utilization measures how much of your total credit limit you are currently using. For example, if you have a credit card with a $1,000 limit and a balance of $300, you have used 30 percent of your available credit. One thing to note about this factor is that each of your accounts are counted individually and as a group. So, if you have several credit cards, it’s good to know your utilization rate on each card. Experts recommend you keep your utilization below 30 percent, but consider that a neutral point.
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Your credit history looks at how long you have been using credit. You don’t have much control over this factor, unfortunately: Your accounts can only be as old as they currently are. Accounts that have been open for at least two years will help your score. Remember, having a limited credit history alone does not mean you’ll have a bad credit score.
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Credit mix looks at the types of credit you have — revolving and installment. Revolving accounts are credit cards or lines of credit, while installment accounts can include auto loans and mortgages, as well as personal loans. A lender tends to give greater weight to your performance on the type of loan you’re applying for, and a credit card issuer looks at your experience with other cards more closely. Having a healthy mix of both types of accounts will earn you the most points in this category.
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New credit makes up the final 10 percent of your total FICO score. You may have read the previous paragraph and thought, “I need to up my credit mix.” While that might be true, take care. Any inquiry for new credit or a line increase stays on your credit reports for two years. A high number of inquiries in a short time can negatively affect your score. So apply for new credit when you need to, not just because you want to.
VantageScore scoring method
The latest version of VantageScore calculates its score a little differently, using an “influential” scale to determine the importance of each factor:
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- Extremely influential is total credit usage, balances and available credit.
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- Highly influential is credit mix and experience.
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- Moderately influential is payment history.
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- Less influential is the age of credit history.
You’ll find other key differences between FICO and VantageScore. While both access credit reports, FICO uses only one bureau’s report to calculate a score. This means your scores might differ from Equifax, Experian or TransUnion, depending on which report is pulled to get your score. VantageScore uses all three reports to calculate its score. Also, FICO needs at least one account to be opened and updated at least once over six months to generate a score. VantageScore can calculate a score after just one to three months of activity.
The latest versions of FICO (10T) and VantageScore 4.0 use trended data, but it could take more time for issuers to switch to it — and for it to show up in your score.
The bottom line
If you have a specific card you’re interested in applying for, check on its minimum credit score requirements to see if you might qualify. A fair to good score may not get you the very best card out there, but you still have solid options. If you can’t qualify for the card you want, a starter card may help you build up your score. And with patience and good scoring habits, you’ll soon qualify for today’s best credit cards on the market.
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