What To Do If A Fair Credit Score Limits Your Credit Card Options - Forbes

Qualifying for a top-tier rewards credit card is a big goal that many people set for themselves. According to the J.D. Power 2021 Credit Card Shopping Study, rewards are the most important feature that influences American’s credit card selections. That’s likely because many of the best rewards cards have the potential to unlock valuable opportunities—from the ability to earn free travel to monthly statement credits to cold, hard cash back.

Yet if you have fair credit, you might not be eligible for the premium rewards credit cards that you want. However, the good news is that even with fair credit, you may still have some solid credit card options available to you. And looking forward, the right credit improvement plan could put you in a position to qualify for more attractive rewards credit cards in the future.

What Is a Fair Credit Score?

The credit scores that most credit card issuers use to predict risk are developed by one of two companies—FICO® or VantageScore Solutions. Although both companies have developed multiple versions of their scoring systems over the years, most of the credit scores that lenders use feature a range of 300–850. (Note: Some credit card issuers may use an alternative scoring range of 250–900.)

According to Experian, here’s what a fair credit score might look like:

580–669 FICO Score
601–660 VantageScore credit score

Of course, when it comes to credit score interpretation (i.e., excellent, good, fair, and bad), each lender makes its own calls. The same is true for minimum credit score qualification requirements. One credit card issuer might accept borrowers with a fair FICO Score of 580 or higher. The next company might require you to have a score of at least 650 to qualify.

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Credit Card Options When You Have Fair Credit

Before you apply for a new credit card account or loan, it’s always wise to review your credit reports and scores to see where you stand. This information can guide you as you compare available credit card options. And since each credit card application counts as a hard credit inquiry, you don’t want to rack up any more credit pulls than necessary.

If you’re in the market for a new credit card while your credit score is fair, one of the following options might be a good fit:

1. Apply for Credit Cards for Fair Credit

With a fair credit score, you probably won’t be able to qualify for a card issuer’s most competitive credit card offers. But you are in a better position than you would be if you had bad credit.

Your choices may be more limited, but it is possible to find numerous credit card offers for consumers with fair credit scores. Some of the credit cards in this category may even offer limited rewards and welcome bonuses. However, you’ll need to work on improving your credit score if your goal is to qualify for a premium rewards credit card in the future.

2. Consider a Credit Union Credit Card

Another potential source for fair credit credit cards is a local or online credit union. Credit unions are nonprofit financial institutions that are similar to banks. However, you typically must become a member before you can open an account or apply for financing.

In some cases, credit unions may offer attractive credit cards to consumers with fair credit scores. Therefore, it might be worthwhile to include credit union credit cards in your search as you compare your available options.

3. Seek Authorized User Status

It’s no secret that credit cards for good credit and excellent credit tend to be the most compelling types of credit card offers. So, if you don’t want to settle for a fair credit credit card while you’re working to improve your credit score, you might consider becoming an authorized user on a loved one’s existing account.

There are several potential benefits to being an authorized user including the possibility of:

Credit score improvement. If a loved one adds you to a well-managed credit card with no late payment history and a low credit utilization rate, the account might help you when (and if) the card issuer asks the credit bureaus to add it to your credit report.
Higher reward-earning potential. Are you in a position to share a credit card with someone with whom you can also share rewards (i.e., spouse, parent, significant other, etc.)? If so, putting your spending on a solid rewards card on which you’re an authorized user might make sense. Let’s say your spouse holds a credit card that earns 3% cash back in certain categories, but you can only qualify for a card with 1.5% cash back. You could get more bang for your buck by becoming an authorized user and sharing the more competitive rewards card until your credit is in better shape.

Ways to Improve a Fair Credit Score

Because your credit score has such a big impact on your overall financial life, it’s wise to work toward earning the best score possible. But the process of improving a fair credit score may be a little different than building credit from scratch or rebuilding bad credit.

1. Review your credit reports and make a plan.

The best place to begin any credit improvement journey is with a thorough review of your credit reports from Equifax, TransUnion, and Experian. Your credit scores, after all, are based on the information contained in these three reports. So, if you want those numbers to move upward, you’ll need to make changes to the underlying data that influences them.

When you review your reports, make a list of any weak spots you discover. Here are a few examples of potential areas for credit score improvement.

High credit card utilization can hold your credit score back. But paying down your credit card balances might net you a credit score increase. You could also try to add on a credit card debt elimination strategy to possibly speed up or enhance your efforts.
Consider your credit mix. FICO bases 10% of your FICO® Score on the mixture of account types on your credit report. If your credit report only shows open credit card accounts, adding an installment loan to the mix might help you, and vice versa. If you are thinking about applying for an installment account, a credit builder loan might be a good place to start. This type of account gives you the opportunity to build credit without taking on a lot of debt in the process.
Credit errors can hurt your credit score. When negative information appears on your credit report, it has the potential to hurt your credit score. This fact is true whether that negative information is accurate or not. According to a June 2021 survey by Consumer Reports, 34% of participants found at least one error on their credit reports. If you discover credit reporting mistakes, it’s important to dispute them with the responsible credit bureau or creditor.

2. Consider out-of-the-box approaches.

Responsible credit card usage does have the potential to improve credit scores for many consumers. But if you already have a fair credit score, there’s a chance you’ve already gone through some initial credit-building steps, such as opening a secured credit card or a starter credit card. If you’re looking for additional ways to improve your scores, you might want to consider some out-of-the-box strategies.

Experian Boost: Experian Boost is a free service available from the credit reporting agency Experian. When you sign up for the program, you give Experian permission to connect to your bank or credit card account. Experian will then comb through your payment history to find qualifying transactions—aka on-time payments to utility providers, cell phone providers, or streaming services. If you have eligible accounts, the program will add them to your Experian credit report and your score might increase in return. According to the credit bureau, 60% of Experian Boost users see their FICO® Score increase. (Note: Experian Boost is not able to improve your Equifax or TransUnion-based credit scores.)
Authorized User Status: In addition to the benefits mentioned above, becoming an authorized user might help you increase your average age of credit. Credit scoring models like FICO and VantageScore consider the average age of the accounts on your credit report. Older is better where your credit score is concerned. If you become an authorized user on a credit card that has been open for quite a while, there’s a chance it might give your credit score an added boost.

Bottom line

Credit improvement takes time. And, in many cases, it’s tougher to move from a fair to a good credit score than it is to move from a bad to a fair score.

As you’re hiking up the credit score mountain, remember to keep up the good habits that have gotten you this far. On-time payments are critical to anyone who wants to earn and keep a good credit score. It’s also wise to watch your credit card balances and how they impact your credit utilization rate. (Remember, a low balance-to-limit credit card ratio is your friend.)

Finally, you may have to be patient. As time passes and you avoid common credit score mistakes, you should put yourself in a good position to see incremental credit score improvements.