Compare the Best Credit Cards for Fair Credit Scores

What is a Fair Credit Score?

A fair credit score is a middle-ground rating, indicating that you have a decent credit history but may still need improvement. A credit score or rating is a three-digit number that reflects your creditworthiness based on your credit history. It ranges from 300 to 850, with higher scores indicating lower credit risk. An average or fair credit score typically falls within the range of 580 to 669. While it may not be the highest score possible, it still offers opportunities for securing credit and demonstrates a moderate level of financial responsibility.

Lenders consider fair credit as an average credit risk, neither excellent nor bad. With a fair credit score, sometimes called a near-prime credit score, you can access credit products such as credit cards, auto loans, and personal loans, although you may not receive the most competitive interest rates and terms.

It’s important to note that credit scores are not static and can fluctuate based on various factors, including payment history, credit utilization, length of credit history, types of credit, and recent credit applications. By understanding the components contributing to your credit score, you can take proactive steps to improve your fair credit score and open doors to better financial opportunities.

Is Average Credit Bad?

While an average credit score isn’t the worst, it isn’t good. Lenders consider people with fair credit to be subprime. Being subprime means that when applying for a credit card, you will receive higher interest rates than those with excellent credit. They may also not have access to the best rewards, balance transfer offers (including 0% intro APR or $0 balance transfer fees), and more.

However, having fair credit isn’t necessarily bad, either. Many people with a fair credit score still have access to unsecured credit cards. Unsecured cards are what people typically think of when they imagine a credit card, unlike secured credit cards, which require a deposit, which a traditional credit card does not.

While a FICO Score between 600 and 650 is considered subprime, it isn’t uncommon. According to Experian, 17% of Americans have a fair credit score on the three largest credit bureaus. Additionally, 12% of Americans have a poor credit score. This means that a third of people with a FICO score have subprime credit. With VantageScore, the average is even higher. Using their scoring method, nearly 40% of Americans have subprime credit, with 14% having an average credit score.

The Negative Impacts Subprime Credit Score

Having average or near-prime credit can significantly impact your financial well-being, resulting in potential drawbacks like:

• Difficulty obtaining new loans or credit: Individuals with fair credit scores may encounter challenges when trying to obtain loans and credit, as lenders may perceive them as higher-risk borrowers. Lenders may offer loans with higher interest rates to individuals with lower credit scores, making borrowing more expensive.
• Limited credit options: Individuals with fair credit scores may have fewer options when choosing lenders or credit cards, as some institutions may prefer borrowers with higher credit scores.
• Housing and employment headaches: Landlords and property management companies often check credit scores when considering rental applications. A fair score might result in rejections or require larger security deposits. Additionally, some employers may check credit scores during hiring, potentially impacting job prospects for people with subprime credit.
• Higher insurance premiums: Insurance companies may use credit scores to determine auto or home insurance premiums, resulting in higher insurance costs.
• Deposits for utilities: Utility companies may require larger security deposits for services such as electricity, water, or cable for individuals with fair credit scores.

Tips for Improving Your Credit Score

If you’re in the fair credit score range, don’t fret. There are actionable steps to take to improve your creditworthiness and move towards a better score:

Pay Bills on Time

Paying your credit bills and balances on time is crucial for improving your credit score. Consider setting up automatic payments or reminders to ensure you never miss your due date. Consistently making on-time payments demonstrates financial responsibility, positively impacts your creditworthiness, and can help you repair your credit profile over time.

Reduce Credit Card Balances

High credit card balances can negatively affect your credit utilization ratio and, in turn, your credit score. Focus on paying down your credit card debt and strive to keep your balances low. By doing so, you improve your credit utilization and showcase your ability to manage credit responsibly to lenders.

Limit New Credit Applications

Each time you apply for new credit, a hard inquiry is triggered on your credit report, which can temporarily lower your credit score. Minimize the number of new credit applications you submit and instead concentrate on maintaining and responsibly managing your existing card and credit accounts.

Common Features of Near-Prime Credit Cards

Credit cards designed for average credit scores in the 600s have some common features. These features include:

Conclusion

Your credit score is a powerful tool that influences your financial opportunities, and a fair credit score paves the way for progress. By understanding the nuances of credit scoring, implementing strategies to improve your score, and maintaining responsible credit habits, you can unlock the secrets of fair credit scores and set yourself up for a better financial future.

Remember, your fair credit score is not a permanent label but a reflection of your credit behavior over time. Dedication, perseverance, and the right financial practices can improve your credit score and achieve financial success.