A credit card is a payment instrument that allows holders to conduct transactions not at their own expense but at the cost of a loan the issuer provides. The financial or credit company individually determines the possible amount of such a loan based on the client`s solvency.
A classic feature of credit cards is the revolving line of credit. This means you can return part of the money spent and then use it again. That is, you can borrow money, then return it, and retake it as many times as you like during the revolving period. It usually lasts for several years.
One of the most critical differences between cards and ordinary loans is that interest is charged on the money spent. If you received a card but did not spend a penny, you will not have to pay interest on the loan.
And if you used only part of the money, interest will be charged only on the amount spent. Thanks to this feature, credit cards are convenient to use as an ‘emergency reserve’ in case of force majeure.
Many people who want to get a credit card are concerned about what credit score is needed for successful credit usage. In fact, there are no special requirements.
Applying for the card is available even for individuals with a bad credit history or no history at all. But then the options will be limited, and the annual interest rate and fees may be inflated. Continue reading to find out more.
What are the credit score ranges?
The credit score (personal credit rating, physical health indicator) is formed based on credit history records. In other words, it demonstrates the applicant’s chances of getting an unsecured credit card. According to it, financial institutions judge the good faith of the borrower.
Different credit bureaus use different credit score range scales. But usually, the calculation is made from 300 to 850 points:
- 760-850 points. This is an excellent indicator. Individuals with such scores usually receive many lucrative offers from lenders;
- 725-759 points. Owners of a very good score can use a loan on favorable terms and receive personal bonuses;
- 660-724 points. This is a good indicator at which the borrower can receive standard lending conditions in any financial institution and a low probability of refusal;
- 600-659. This is a fair indicator. Borrowers with such a score usually pay higher annual interest rates for the use of loan funds than those with a higher score;
- 300-559 points. This is a poor indicator, at which the risk of refusal increases, and the conditions for issuing a loan worsen.
What credit score do you need to get approved for a credit card?
The quality of the credit history is the main factor taken into account by the creditor company when approving a secured card application. 80% of loan rejections are due to limited credit history and a bad rating.
Credit rating is created based on data from credit bureaus. It includes the total debt burden of the borrower, the number of closed and open loans, and the timeliness of repayment of previously received loans.
But the most important criterion in calculating the rating is the absence or presence of overdue debt. As a result, a certain score is formed. The higher your credit score, the lower the risk of loan rejection.
VantageScore is a unique scoring system, different from FICO, but still, a great way to evaluate your credit status. VantageScore credit scores range from 300 to 850, just like FICO. But the evaluation factors are not expressed in a specific percentage. The level of their influence is indicated. Consider the following list:
- Payment history – extremely influential;
- Age and type of loan – of great importance;
- The percentage of used credit limit – very influential;
- Total balances and debts – moderately influential;
- Recent credit behavior and requests – less influential;
- Available credit – less influential.
VantageScore also highlights things that are not taken into account when calculating the rating. These are race, skin color, nationality, religion, gender, age, marital status, salary, etc. They are often referred to as important credit rating factors. Although, in fact, they are not.
FICO credit score
FICO is another well-known credit scoring model. Fair Isaac developed it in 1989 by creating a carefully protected mathematical formula that considers a variety of information held by consumer credit bureaus. The FICO Score is usually between 300-850. It is determined based on the following factors:
- Payment history – 35%;
- Amounts owed – 30%;
- Length of history – 15%;
- New credit – 10%;
- Credit mix – 10%.
FICO score does not consider indicators such as age, marital status, income of the borrower, and employment status.
What credit score is needed for a credit card?
Practice shows that you need to have a score of at least 700 to qualify for a credit card with low annual interest rates, cashback and travel rewards, and other nice perks. The 750+ rating provides applicants with a wide range of beneficial options.
Those with a good, fair, or poor score may also receive approval. But in this case, the perks will be less significant, and the annual interest rates will be high.
Thus, it is impossible to specify exactly what minimum credit score needed to receive a secured credit card. You can get approved with any credit score. But if your credit score is too low, then you are unlikely to be able to get various rewards card perks (cashback, miles points, profitable APRs, etc.).
Credit scores required for different types of credit cards
Bank cards are one of the most popular payment methods worldwide. They are a universal means of payment and have a number of advantages compared to alternatives such as cash. Different types of cards are available today. They can satisfy any requests and wishes of consumers. Here are the main types:
- Bonus cards;
- Balance transfer cards;
- Secured cards;
- Travel cards;
- Cards with zero annual interest;
- Business cards;
- Student credit cards;
- Shopping cards.
Depending on the type of secured credit card, the user can make purchases in stores and on the Internet, pay bills, and even withdraw cash. There are also multifunctional cards that provide users with lucrative perks, have a zero annual interest rate, allow them to earn airline miles, and replenish someone else’s credit card account.
After reviewing your credit score, the lender can approve your card application and give you the card you want or offer a different credit card. Read more about this in the sections below.
Credit cards for people with excellent credit (760 and up)
The choice of the best credit cards for people with excellent scores (760+) is unlimited. They have access to a wide range of loan offers from reputable lenders. Thus, when deciding on a credit score you need, it is important to consider your own goals and financial circumstances.
Those interested in earning airline miles can opt for the American Express® Gold Card. It is the best travel credit card today. Citi® Double Cash Card is a great credit card to get for people interested in cashback.
After paying for the goods with such a card, you get a part of the purchase price back. The Chase Sapphire Preferred® Card delights customers with its welcome bonus. The Citi Simplicity® Card has a 0% APR period. Chase Sapphire Reserve® is considered the best for luxury perks.
Therefore, the credit card industry offers various credit options for people with excellent credit. So having a score of 760-850, be sure that you will not encounter difficulties when contacting credit card companies.
Credit cards for people with very good credit (725 to 759)
People with very good credit scores can also choose from multiple credit card options. They get low, but not the lowest, interest rates, as is the case with excellent ratings. Rewards programs and perks allow borrowers to benefit from using borrowed funds.
The most popular cards for people with a rating of 725 to 759 are:
- Chase Sapphire Preferred® Card;
- Capital One Venture Rewards;
- Chase Freedom Unlimited®;
- Discover it® Cash Back;
- Capital One Quicksilver Cash Rewards;
- The U.S. Bank Cash+™ Visa Signature® Card, etc.
If you have a very good credit score, don`t hesitate to qualify for a card right now, and you will get approved.
Credit cards for people with good credit (660 to 724)
A score between 660 and 724 is considered an average credit score. Applicants with this rating can apply for the card with a high probability of approval.
However, the conditions may vary depending on the chosen lender. As a rule, higher annual rates (up to $500) apply than in the case of excellent and very good ratings. Regular APRs ranging from 16.74% to 28.49% are usually charged. Perks are less significant.
Here are some options you can consider with a good credit score (between 660 and 724):
- Chase Sapphire Preferred® Card;
- Discover it® Cash Back;
- Chase Freedom Flex℠;
- American Express Cash Magnet® Card;
- Chase Freedom Unlimited®, etc.
Credit cards for people with fair credit (600-659)
Credit card offers are also available for people with fair credit (600-659). Lower credit scores are not a direct reason for getting rejected by a credit card issuer.
We have indicated above that there are a number of other factors that are needed for card approval. Although it is true that a higher credit score is more credible than a lower one.
If you have fair credit, then most likely, interest rates will be higher than for people with good, very good, and excellent ratings. A lower credit limit will be provided.
You won’t be able to access great benefits, but some of them (such as accumulating points for purchases) may still be available to you. The main thing is to find a good lender and the key to improving your credit.
So, keep track of your credit and choose one of the popular credit options:
- Discover it® Student Chrome;
- Mission Lane Cash Back Visa®;
- Capital One Platinum;
- Upgrade Cash Rewards Visa®;
- Capital One QuicksilverOne Cash Rewards, etc.
Credit cards for people with no credit or poor credit (300 to 559)
You are mistaken if you think that credit cards generally used by people with high ratings. Many credit card holders have no credit or low credit score and enjoy all the credit benefits without any problems.
Modern loans or credit cards have credit-building features aimed at strengthening your credit. So, if you use your card responsibly, you can turn your bad credit score into a good one or build your credit from scratch.
Here are some poor credit score cards you should consider:
- Discover it® Secured;
- Navy FCU nRewards®;
- OpenSky® Secured Visa®;
- Tomo Credit Card, etc.
Don’t think that using the card will result in lowering your credit. On the contrary, it will help you increase it.
How your credit score affects your credit card approval
A credit score is not the only factor in whether you’ll get a new credit card approved. But it plays an important role. Based on your credit, the lender makes an offer.
If the score is high, there are many perks, such as a higher credit limit and low annual interest rates. If the score is low, perks are not so diverse, and annual interest rates on credit card debt are high.
Given the above, you are probably thinking about how to improve your score. Here is a list of factors that hurt your credit score:
- Loan payment delays. The more debts, the worse the rating. The history usually displays data for the last 5 years. Therefore, if you had any delays before the 5-year period, they will not affect your current credit rating in any way;
- The number of concluded loan agreements. A large number of agreements concluded with creditors negatively affect the rating;
- Lack of history. On the one hand, this is good. You have never used loans, so you do not have any debts. But on the other hand, it is unclear what kind of borrower you are. There is no data on which the lender can evaluate your responsible fulfillment of credit obligations. Therefore, the rating is low;
- Loan refinancing. Refinancing means that a person gets a new loan to pay off the old one. This lowers the interest rate on the loan and extends its term. When refinancing, the amount of debt does not increase, but the number of concluded loan agreements increases. And this fact lowers the rating;
- Lots of credit check requests. With written consent, any legal entity may view your credit report. Such data can be requested not only by banks but also by a number of other organizations. For example, microfinance organizations or mobile operators. Your credit score falls if you have a lot of such requests in a short period.
How your credit score is calculated and how to improve it
FICO scores range from 300 to 850 and are generally calculated based on a detailed examination of five broad categories of information in a report:
- Payment history – 35%;
- Credit utilization – 30%;
- Length of history -15%;
- A mix of accounts – 10%;
- New accounts/inquiries – 10%.
Read the description of each category in the following sections.
This is the most important factor in forming a credit rating. Timely payments show creditors your responsibility. Punctuality in paying bills and compliance with contractual obligations are the most important indicators of your creditworthiness.
This is the second important factor that FICO considers when evaluating the score. It is 30% of the main indicator. The credit utilization ratio is the amount of revolving credit currently in use divided by the total amount of revolving credit available. To improve this indicator, you can raise the amount that acts as your credit limit or add cards with available credit.
Length of credit history
The length of the history is 15% of the score. This factor indicates the average age of your accounts, as well as the time that has passed since these accounts were used.
Mix of accounts
This factor, although less important than the previous ones, still plays an important role. Attention is drawn to whether you have a combination of different credits (for example, a mortgage loan, a student loan, and a car loan). Lenders like to know that you can manage different types of accounts responsibly.
The last 10% of your FICO score consists of data related to new loan inquiries, such as the number of recent loan requests and accounts opened. Opening more than one credit profile can be interpreted as a sign of risk and cause your rating to go down.
What’s a Good APR for a Credit Card?
When you apply for a credit card, you probably want to get the best possible APR. The average APR is 16% today. But it may differ depending on the rating of the applicant. The table below illustrates good APRs for different scores.
|Excellent (760 and up)||0%-12%|
|Very good (725-759)||14%|
Thus, the higher the score, the lower the APR. People with excellent ratings can get the best secured credit card offers, while people with poor ratings have to pay higher rates.
A credit rating is a general conclusion about a person’s level of creditworthiness based on an analysis of credit reports. The rating is usually formed based on conscientiousness in fulfilling obligations to creditors; diversification of loans; length of credit history; the time since the history was updated, etc.
Practice shows that credit rating is vital for those who qualify for cards. The credit score requirements of modern lenders are not very serious, and from good to excellent credit ratings can be approved.
But the terms are different. The best annual interest rates, lucrative bonuses, and various perks are provided to applicants with high scores.
Therefore, you should think about improving your credit score if it is low. Please note that systematic delays in payments, a large number of report verification requests, the presence of several concluded agreements with creditors, etc., can damage the reputation. Use credit consciously and responsibly, and then you will certainly be able to improve your rating quickly!