Being a millennial in today's fast-paced world can be challenging, especially when it comes to managing personal finances. One area that often confuses people is credit cards – which ones to apply for, and what credit score is necessary to be approved for them. In this Flik Eco article, we will be breaking down the complex world of credit scores and credit cards and providing you with a detailed understanding of what score you need to have for different types of cards. So, buckle up and let's get started!
Credit Scores Required For Credit Cards Table of Contents
Understanding Credit Scores
A credit score is a numerical representation of an individual's creditworthiness. It is calculated based on factors such as payment history, amounts owed, length of credit history, types of credit used, and new credit. Credit scores can range from 300 to 850, with higher scores indicating better creditworthiness.
Factors Affecting Credit Scores
- Payment history - This is the most critical factor contributing to your credit score. On-time payments positively impact your score, while late payments, missed payments, or defaults negatively affect your score.
- Amounts owed - The total amount of debt you owe, as well as the proportion of available credit you're using, contributes to this factor. Keeping your balances low and avoiding maxing out credit limits helps in improving your credit score.
- Length of credit history - Having a longer credit history generally leads to a higher score, as it shows that you have consistently managed credit over time.
- Types of credit used - A mix of different types of credit, such as credit cards, loans, and mortgages, can positively affect your score.
- New credit - Applying for too many new credit accounts within a short period can negatively impact your credit score.
Types of Credit Cards and Their Credit Score Requirements
Not all credit cards are created equal, and each has its own unique features and requirements. Below is a brief overview of the types of credit cards available and the credit scores required to be approved for them.
Secured Credit Cards
Secured credit cards are ideal for individuals with poor credit scores or no credit history at all. These cards require a security deposit, which serves as collateral for the credit card issuer in case the individual fails to repay their balance. The credit score required for a secured credit card can be as low as 300.
Unsecured Credit Cards for Bad Credit
These cards cater to individuals with credit scores in the range of 300-579. Unsecured credit cards for bad credit do not require collateral or a security deposit, but they often come with high-interest rates and fees to offset the risk taken by the lender.
Unsecured Credit Cards for Fair/Average Credit
For those with credit scores in the range of 580-669, unsecured credit cards designed to cater to fair or average credit may be accessible. These cards typically offer moderate rewards and advantages and have reasonable interest rates.
Unsecured Credit Cards for Good Credit
Individuals with credit scores between 670-739 can usually qualify for unsecured credit cards for good credit. These cards often come with better rewards, lower interest rates, and additional perks compared to cards designed for those with lower credit scores.
Unsecured Credit Cards for Excellent Credit
For those with a credit score of 740 or above, the world of premium credit cards opens up. These cards offer generous rewards programs, travel perks, low-interest rates, and other benefits, but they can also come with high annual fees.
Credit Scores Required For Credit Cards Example:
Imagine you have a credit score of 650, which is considered fair. With this score, you may not be approved for a premium travel rewards credit card, but you can still qualify for an unsecured credit card designed for fair or average credit. This card may offer a decent rewards program and a reasonable interest rate. By using the card responsibly and paying your bills on time, you can gradually improve your credit score and eventually qualify for a card with better rewards and features.
As you can see, understanding your credit score is essential for choosing and applying for credit cards that suit your financial needs and credit history. Now that you have a better understanding of the credit scores required for various types of credit cards, you can make informed decisions and work towards improving your credit score. If you found this article helpful, don't forget to share it with your friends and explore other informative guides on Flik Eco!
