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Credit Tips: Building, monitoring, and maintaining credit

What Is My Credit Score?

Source: https://creditcards.usnews.com/#creditScore

Your credit score is a calculation of your credit risk and how well you use credit. Credit card companies use credit scores to determine creditworthiness. Many creditors use the FICO score. If you have good (670+) or very good (740+) credit, you will qualify for credit cards with better terms. With fair (669 or lower) or poor (579 or lower) credit, you may not qualify for the most attractive card terms. However, there are cards available for those with bad credit.


Credit cards for good to excellent credit

With good to excellent credit, you will be more likely to qualify for the best credit cards, including those with rewards and no annual fees. These cards have the most attractive terms, such as lower APRs, higher credit limits, rewards and cardholder benefits. A good credit score means you’ll have more credit card options to choose from.

Credit cards for bad credit

If you have a FICO score below 580, you are considered very risky by credit card companies. People with FICO scores below 580 typically do not qualify for traditional credit cards, however, there are credit cards available for those with bad credit.

Credit cards for bad credit have terms that offset the risk for lenders. They may require an initial deposit, or have a lower credit limit, an above-average APR or additional monthly fees. There are two types of credit cards for consumers with bad credit: secured credit cards and unsecured credit cards. Secured credit cards require a cash deposit, unsecured credit cards do not. Using credit cards designed for people with bad credit, you can rebuild your credit rating if you use them responsibly.


Secured credit cards

Secured credit cards require a cash deposit on activation, usually between $200 to $500. This amount is typically equal to the card’s credit limit. With a deposit, secured cards are less risky for lenders than unsecured cards, so they have easier approvals and lower APRs.

Secured credit card deposits are not used for payments. Instead, they are used as collateral for the credit card company if you default on your payments. The deposit will be collected by the bank in full or in part if you default on the card agreement or if your account is terminated. As your credit history improves, you can qualify for credit limit increases and a better credit card with more benefits.

Unsecured credit cards for bad credit

Traditional credit cards are unsecured cards that do not require a cash deposit.

Unsecured cards for bad credit often have processing fees or high annual fees, and typically have higher APRs to offset the risk of lending money to someone with a low credit score. They may also lack a grace period for interest charges.

Credit cards for no credit history

Like those with bad credit, people with no credit history can find it difficult to be approved for a traditional unsecured card, which are cards that don’t require a security deposit. Because unsecured cards aren't backed by collateral, it's difficult to get approved for one if you have no credit history. However, credit card companies have credit cards designed for college students and other consumers who have not yet established a history of using credit.

Student credit cards can be a good choice for a first credit card. Many offer benefits such as cash back, rewards for good grades and credit score tracking. This type of card can typically be obtained by people with average credit or no credit history, however, many lenders will require proof of income. Additionally, the Credit CARD Act of 2009 requires cardholders to be at least 21 years old, unless you or a co-signer have adequate proof of income.