By Randi Gollin | American Express Credit Intel Freelance Contributor
6 Min Read | September 22, 2020 in Cards
Find your credit score, then determine the best credit card for your credit score.
High credit score credit cards typically offer low interest rates, high credit limits, and plenty of perks.
People with fair-to-poor scores can apply for secured cards and build credit with timely payments.
Shopping for a new credit card may seem as simple as filling out an online application – but applying is not a guarantee of approval. Credit card approvals are based largely on credit scores, so you can boost your chances of obtaining that green light by looking for the best available credit card to match your credit score. Here are some tips and pointers.
To start, it’s a good idea to find your credit score and see where you stand. You can look for credit-score-monitoring tools online or get a free credit report at annualcreditreport.com, which is run jointly by the three major credit bureaus. The site offers a free report every week from each bureau until April 2021, after which it reverts to one free report per year.
A higher score – in the “very good” or “excellent” credit score ranges – can usually expand the variety of credit cards available to you. In this category, lenders see you as a low risk, so you have a better chance of qualifying for that credit card triple play of a low interest rate, a high credit limit, and plenty of perks.
Generally, the threshold for excellent credit in the most common credit scoring model – FICO – is 800 and up. A perfect score of 850 is possible, but only 1.5% of Americans usually achieve it.1 What is the best credit card you can get with a credit score this high? At this level, credit cards typically offer some mix of the following:
Annual fees for such high credit score credit cards range from $0 to $550. Before applying, consider how well your lifestyle and spending habits match a particular card’s mix of dining, grocery, travel, and general spending benefits.
Note: If your credit score is in the highest range, you probably have 10-plus years of on-time payments, a diverse mix of credit types – possibly including student loans, a mortgage, an auto loan, etc. – and low credit utilization, which is the portion of your total credit limit that you use at any given time. Experts say that a credit utilization ratio above 30% will start to hurt your credit but, according to one analysis, people with an 800+ score use an average of only 7% of their available credit.2
Credit scores from 740 to 799 would put you in the “very good” category, which is above the U.S. average and shows lenders that you’re a “very dependable” borrower, according to Fair Isaac Corp., the provider of FICO.3 Although technically a level down from “excellent” in the credit score ranges, it was hard to discern any difference between the best credit cards for very good and excellent scores – their perks are roughly the same.
Regardless of the perks, the credit limit you’re offered on any of these cards will consider your income as well as your credit score.
Most lenders consider 670 to 739 to be a “good” FICO score, and Fair Isaac notes the average American credit score falls into this range. At this level, you can expect more scrutiny from lenders, who look at your earnings, level of debt, and recent payment history before issuing a credit card. To get into the “good” range, you need to have used credit for at least three years with no late payments.
Good credit increases your chances of being approved for cards with low introductory APRs – though probably not zero – 1.5% to 5% cash back or up to 4 rewards points on eligible purchases in spending categories such as supermarkets, gas stations, and travel. You may also be offered sign-up bonuses in points or cash, but at potentially lower levels than those offered for people with high credit scores. You can generally expect annual fees ranging from $0 to $250.
A credit score of 580 to 669 is considered “fair,” which is below average. Still, people with “fair” credit scores have credit card options. If your score is on the higher side of this range, you may be eligible for a credit card with a relatively low credit limit that offers about 1% or 1.5% cash back on eligible purchases, or a similar level of rewards points. And remember, credit card APRs go up as credit scores drop, so the main purchase APR that comes with one of these credit cards is likely to be above the average, which was 14.52% in May 2020 for all U.S. credit card account holders and usually hovers around 15%.4
If your score is between 300 – the lowest possible score – and 580, you fall in the “very poor” credit category. It signals people who are considered a high credit risk.5 People with credit scores in this range usually have two main options: become an authorized user/additional card member on someone else’s account or apply for a secured credit card.
Additional card members are not legally responsible for the account – only the main account holder is. But an additional card member can still get a credit score benefit from the account if it remains in good standing and payments are on time.
With secured credit cards, you pay the card issuer a deposit equal to your credit limit – usually about $200 to $500 – and the card company draws from it if you miss a payment. If you make on-time payments, you may eventually qualify for a standard credit card. Some pay back the deposit or offer a higher credit limit after a set number of months. Most secured cards don’t charge an annual fee, but APRs can be high, and perks are typically rare – though a few may offer 1-2% cash back on eligible purchases.
When shopping for a new credit card you can boost your chances of approval by applying for cards that best match your credit score. When you have a high credit score, the best credit cards typically offer low interest rates, high credit limits, and rewards including cash back, miles, or points on dining, entertainment, travel, and other purchases. Perks decrease and interest rates rise as credit scores dip, but there are ways to boost your credit score over time so you can put higher-level credit cards within reach.