Best Credit Cards for Fair Credit

Written by Robert Ferry on December 11, 2021
Best Credit Cards for Fair Credit

It is difficult to find the right credit card merely because people do not have the right credit score that lenders are looking for. As a result, they face challenges in getting a credit card that best fits their requirements.

Lenders are of the opine that they would need to do due diligence to make sure that the borrowers will not default on their payment. In this case, the borrowers cannot meet the amount by the due date, which puts the lenders at risk. So borrowers must go for the credit card they believe they can afford to pay back with the interest payment.

In general, people get credit cards from different banks and credit unions that charge them a high interest. This causes financial distress to the borrowers. So it is wise to check out multiple lenders. In that way they can compare their offers, benefits, and rewards against one another to pinpoint the card that best suits a borrower's needs.

Financial analysts advise that if people do not have the requirements that qualify for a top tier credit card – one that offers a bundle of rewards and benefits, then the next best option is to go with those credit cards that you do qualify for, one that accepts your credit score as fair credit. The methodology behind this is that these cards can help people boost their credit rating. This can be a route for them to avail of top-tier cards in the future.

Moreover, fair credit cards also allow people to earn cashback and other similar rewards. People ask for such benefits when they are selecting a credit card. Similar rewards include getting a proportion of amount back as a result of using the card for a particular category. This can include gas stations, utilities, restaurants, grocery shopping etc.

This article is going to study fair credit cards. It will discuss what the term "fair credit" means and how various lenders calculate the credit score. The article will highlight the steps a person should take before choosing a credit card with fair credit. The article will also include the process to select the best credit card with fair credit. The article will review how people can improve their credit. The article will list down some best credit cards in the industry for people with fair credit.

What credit amount can qualify as fair credit?

Credit score is related to the FICO score of an individual's credit line, which corresponds to his financial situation. The score is between the radius of two extreme three-digit values. The lower quartile will have a value of 300 while the upper quartile has a score of 850.

Fair credit is defined as the average credit rating of an individual based on their credit history. This means that their credit is neither bad nor it is considered a good credit score. Instead, their score is somewhere in between the two ranges.

For a person to be granted the card based on their fair credit rating, they would need to fall somewhere in the upper 500s and mid of 600s on the FICO scoring model. In other words, fair credit is the amount between the FICO score of 580 and 669. Fair credit candidates that follow within this radius are referred to as subprime borrowers. People with fair credit are charged a higher interest rate.

People can have average credit for several reasons. For instance if their credit history has limited information. Or if they faced some circumstances where they experienced issues with their credit in previous times. However, if people work on fixing those negative factors that are causing a hindrance to them getting a good credit score, there is a chance that these people can move up the ladder towards high tier credit.

How do lenders evaluate your credit score?

The three major credit bureaus keep a record of each individual's credit history. These bureaus use a variety of factors that lead to a specific credit score of different people. Each factor has a specific percentage attached to it that corresponds to people's credit rating. The following factors considered are as follows:

Payment history of the individual

The record shows how frequently people had made their payments in due time relative to the frequency when they made the payments late merely because they either forgot about it or did not have the finances to pay for it.

When individuals make the payment on time, it establishes that they are dependable and responsible beings. And doing business with them sends out a good signal to the lenders and other credit card issuers that are looking for trustworthy people who will not fall out from their word to pay on time.

Keeping that in mind, the proportion of a person's credit score accounts for 35 per cent in the category of payment history.

The percentage of available credit being used

The credit bureaus calculate the credit utilization ratio to compare the proportion of available credit an individual is utilizing now relative to the overall amount of credit that they have with them.

Considering that, it is advisable that people should not go beyond the 30% limit to prevent their credit score from being affected in an adverse manner. And that is why the weight assigned to this category is 30% of the credit score.

How long is the credit history of a person?

A person who has recently opened a bank account will have a weak credit history instead of an individual who has had an account at the bank for a few years now. The reason behind this is that the latter individual must have worked on building his credit history over the years by paying their bills in due time and not lagging behind any undue payments.

As a result, the length of credit history has a 15% weightage attached to it corresponding to a person's credit score.

Check for a new credit line

Credit bureaus like Equifax run a credit check to see if the individual opened any new line of credit or not. Any application that requires the agency to carry out a hard pull on your credit would bring some adverse consequences that will affect that individual's score. The consequences involve a decrease in the credit score.

Hence, it is highly discouraged that people do not apply for new credit cards quickly. In the case they do, it would be included as part of their credit check, which will show in their credit history. As a result, the lenders might be suspicious of why you needed a new credit line. This suspicion will give a reason that a particular person is in need to borrow a large amount of money than they could afford to pay.

This category is given a 10% proportion of the overall credit score.

Availability of different kinds of credit.

The credit score is also determined by the individual's credit mix at their disposal. For instance, the credit mix will include credit cards from different banks, car loans from a lender, mortgages or house loans and so on.

The credit mix accounts for 10% of the credit score, so it is advisable to keep a limit on opening new credit lines to decrease the liability factors.

How can people improve their fair credit score?

In this case, individuals have kept their fair credit score constant for some time now, and then they should work on improving their overall credit rating. There are several steps a person should consider to move from fair credit to good credit. The following steps should be considered:

All kinds of bills should be paid before and on the due date

If there are any payments that are lagging behind or if you missed out on any payment, then this clumsy mistake might cause some damage to your credit rating. All outstanding amounts should be catered for in due time, and ,if a person is having financial trouble, then this amount should not increase beyond a specific limit.

Credit utilization ratio should be kept within the specified range

Any having different credit lines should ensure that the credit utilization ratio does not go beyond 30%. Within this range, the credit score will not be affected adversely. But if the ratio increases, then that can cause serious damage to the credit rating: the lower the credit utilization ratio, the better.

Perks of credit pre-qualification

In the case of pre-qualification, it is highly unlikely that the credit issuer would carry a hard check. Since the probability of a hard check happening is relatively low, so with a soft pull, borrowers would be given the credit card by having just the right amount of information that does not adversely affect their credit score.

Credit report Analysis and correction of errors

Having inaccurate information on the credit report is not a good sign, even if the error is minimal. Hence it is advised to always go through your credit report before applying for the credit card to make sure there isn't anything that might lower the credit score upon a check from the card issuer.

In this case, there are any discrepancies, and then they should be taken with the credit bureaus so that they can correct them for you. As a result, this will save you from the consequences of a lower score which might include rejection or acceptance but with a high-interest rate.

Precautionary measures should be taken when you have to cancel old credit cards

A credit card that a person has owned for several years would have a positive impact as it would increase their credit history. It is advised that even if the card is not used on a daily basis, it would still be beneficial to keep the account active and open since that would positively add to your credit history.

What is the importance of transferring from fair credit to higher credit?

Having a higher credit would mean that people would not have to go through the trouble to see which company would accept their credit score and grant them the credit card. Instead, the positive thing would be that any card issuer would want a person with a high credit to be their regular customer. So we can say that a high credit leads to greater offers and rewards, including cash backs and bonuses.

Companies consider people with high credit as opportunities to stand out from their competitors by granting them credit, including car loans, mortgage, refinancing a mortgage, credit card, etc. This is beneficial because if a person is happy by having fair credit, they are prone to get high interest on the credit they will borrow. This means they would pay a large interest payment which will deplete their savings.

A higher credit rating would encourage saving more and reducing expenses. Consider the example of getting a long term loan such as a mortgage on the house. If a person has fair credit, then they would have to pay a large amount of interest paid over the years despite having relatively small monthly payments. In the longer run, they are prone to commit loss. However, if a person had a high tier credit, they would need to pay low monthly payments and give a lesser interest amount.

So for a house loan, it is in the benefit of a person to get a good interest rate that might not affect their savings, and in fact, they could save more rather than paying more as part of their expenses.

The credit score is vital for other credit types like getting insurance, which can include car insurance, life insurance, etc., and the probability of getting a job from an employer. Having a good credit rating means that the person is not under any financial distress, so they would hire you in an effective way. However, if they see that you have fair credit and are dealing with finances, that might leave a good impression and lose that job.

Factors to consider choosing the best credit card with fair credit

Selecting the right credit card for you is not as simple as it looks. There are a series of steps a person needs to go through to make the best decision possible. If these steps are not followed, it is unlikely that you will be able to get a card that fits your financial situation and requirements like a lock and key. Many analysts argue over the steps that should be considered. The following guidelines include:

Knowledge about credit score

It is crucial to know the information regarding the cards a person could be eligible for based on their score as per a scoring model. The first step towards selecting your card involves doing some due diligence at your end regarding various card issuers and the set of requirements they ask for. This will include having the know-how of your own credit score and then looking at the companies that might give you an offer. This helps eliminate many alternatives.

Annual Percentage Rate (APR) offered by companies

People should choose those card issuers that are offering low or, at most fair, APR. This is charged on the balance or amount an individual keeps in their credit card. If this rate is lower, then the person would have to pay a lower interest payment in the case a person misses out on the monthly payment. This could be due to human error or financial limitations. A fair APR will enable the saving of money if an unpaid amount is lagged on for months.

Knowledge about all types of fees

The due diligence shows its importance here as well, where a person would know about various fees that would be attached to the card if they would like to go and apply for it. These fees would include annual fees that are either charged monthly or a one-time payment charged yearly.

There are several top tier fair credit cards that charge no annual fee relative to other cards that do have an annual fee attached to them. Other fees consist of late payments and bills, foreign transaction fees, and hidden fees. A less expensive card would add to the greater value as the expenses and costs are greatly reduced.

Pre-qualification offers

There are many online tools that people, who are looking to have a credit card, could utilize and compare pre-qualified offers against one another to see which one suits them best. This will not have any negative effect on an individual's credit score. One tool that is available online is CardMatch, which is mostly recommended by experts.

What ways should be adopted to select the right credit card having fair credit?

The ideal credit card for those with bad credit is one that will assist you in achieving your financial objectives. It's crucial to remember while looking for a new credit card that it will be a tool to assist you enhances your credit score. Here are some factors to think about while selecting credit cards for fair credit:

What kind of value is the card offering?

The majority of credit cards for people with bad credit have simple, clear rewards schemes. Simple rewards don't mean that they are of a lesser value. In fact, these awards come in different ranges, such as there are credit cards for those with bad credit that provide up to 5% cashback on certain purchases.

Is the card within or out of your budget?

It is important to know that you can pay all sorts of expenses that are related to the card. All types of fees should be considered, like annual fee, late payment fee, and foreign transaction fee, hidden charges, interest rate, balance transaction cost etc.

Are there any tools linked to the card that can boost the credit score?

The first step to boosting your credit is to keep track of it. That is why it is imperative to know that the card a person has an interest in provides them with resources that assist them in maintaining a track on their credit or not.

Several credit card companies, such as Citi and Discover, provide free access to a cardholder's FICO score.

Top credit cards for people having a fair credit score

Although there are many card issuers in the market that are offering cards, each one has its own unique features and reward system. In this section, we will look at those cards that offer cards on fair credit, but the people's preferences might not be the same when choosing each of the following cards. The cards include:

QuickSilver One credit card

This card is considered to be one of the best cards in the market that is best for cashback. The card is offered by a bank holding company called Capital One. QuickSilver One comes with 1.5% cashback on any purchase made using this card.

You may earn as much as you want, and you can get it in the form of a check, a statement credit, a credit on a recent purchase, or gift cards.

This card is the best choice for people with a fair credit that gives those cashback, but there is also a $39 annual fee. In order to pay the annual fee with your points, you'll need to spend $2,600 on purchases with the card per year.

Destiny Mastercard

The Destiny Mastercard that First Electronic Bank offers is perfect for those that have had bad credit for the most part of their life. So those individuals that have faced challenges before, like bankruptcy, can surely apply for this card. The card can also be opted by people that have a poor credit history.

The bank is also responsible for sending your credit score to the major credit bureaus. And in the case the person is able to pay his dues on time, then that will show in their credit history, which will improve their credit as well.

If a person is granted to have this card, then they would also have to pay the annual fee of $75 for the first year and then $99 in the years to come.

Credit One Bank Platinum Visa card

This card is specifically designed to increase the credit line of its users, and that is carried out by a thorough and regular review of the account. Having additional credit available might be beneficial in the case of an emergency situation, but it is also important to improve the credit. The card is also offered to those applicants that have fair credit.

Applicants of this Credit One Bank Platinum can earn a 1% cash-back when making a transaction on various items and utilities that include gas, groceries, internet, and TV services, along with several others.

The users of this card would have to pay an annual fee of $75 in the first year, which will be increased to $99 every year after the first year.

Discover it Student cashback card

Students are most likely going to have a poor credit history. That is why Discover it student cashback is designed to help the students improve their credit while looking after their credit account.

On bonus categories that change every quarter, the card offers a 5% cashback returns rate. When you activate the card, you may receive a 5% bonus on up to $1,500 in quarterly purchases in the categories of gas stations, restaurants, grocery shops and the e-commerce store Amazon.com.

The highest amount you may receive from the 5% bonus categories in a year is $300. On all other purchases, you'll get 1% cashback. If you take full advantage of this deal, the additional 5% categories may be worth $600 in your first year. This means that with Discover's Cashback Match, any cashback you earn will be doubled. Moreover, the credit card does not have an annual fee.

Alternatives best credit card for fair credit

Discover it Student chrome card

The Discover it Student chrome is another excellent option for students since it accumulates some of the greatest features of two different credit cards that are offered at Discover. They include Discover's student and cashback cards.

The card redeems 2% of the total amount back provided that the transaction took place at gas stations. The card also offers $1000 back to the user if the card was used at a restaurant. Moreover, Discover it offers 1% back on the amount that is spent anywhere other than in the categories of gas stations and restaurants.

Capital One Platinum Credit Card

The Capital One Platinum Credit Card may be a good option if you have acceptable credit and want a straightforward card that's easy to use and comprehend. This card is for persons who are striving to improve their credit. In as little as six months after opening a new account, you'll be automatically reviewed for a greater credit line.

This credit card is quite convenient to use, and it can be understood without any hassle. It doesn't include cashback or travel rewards programs, like many other cards aimed at those with bad credit. Instead, the card focuses on assisting you in effectively managing your expenditure in order to meet your financial goals. On-time payments are rewarded with an automated credit line, which can help you improve your credit score over time.

Anyone who has previously struggled with late or missing payments may be interested in improving their credit. This card is an excellent tool for achieving that aim. If a person can pay their dues on, then their credit score should gradually increase. This card may help you monitor your cash flow and protect you from fraud with every transaction. It has no yearly charge and no costs for international transactions.

Conclusion

When your credit score is fair, getting approved for a lucrative credit card is not simple, but it might not be as difficult as you think. Having the correct credit card may provide you with a convenient payment option and significant advantages while also allowing you to build credit so that you can obtain even more lucrative credit cards in the future. And, if you make the payments on time and have little debt, you could be amazed at how quickly your credit improves.

It is important to follow the correct procedure to know the type of card that would be a perfect fit for you. While the industry is wide open for people that belong to high tier credit scores, there are people that fall in the range of fair credit. This mid-range credit makes those people search for the right card keeping in few the APR, credit score, and by seeking out pre-qualified offers. So it is imperative to follow all the steps and carry out due diligence at your end to cater for all the card issuers.

Moreover, it is needed that people also see what kinds of fees are attached to their card so that they know whether they can pay for it or not. Along with the mainstream costs like annual fees, and transaction costs, there are hidden charges too. They include late payment fees, foreign transaction fees and so on.

A word from experts is that people should know the reasons why they are looking to get a card. There are several reasons why individuals want a credit card. They include improving credit score, cashback and rewards, for an extra credit line etc. Based on their preference, the correct decision should be made, which will be beneficial for them in the long run.

Article written by Robert Ferry
We are an unbiased knowledge center for finance and our goal is to help you make your own, educated decisions about getting your credit life turned around.
Credit Optimal is an unbiased knowledge center and our goal is to help you make your own, educated decisions to getting your credit life turned around.
Copyright © 2022 Creditoptimal.com