Nothing says "vague" like the way credit scoring models name the different ranges you might fall into. And if you recently looked up your credit score and saw the word "fair," you're probably wondering what that even means.
According to FICO, "fair" is really considered to be average. A fair or average credit score falls into a range of 650 to 700. Fair is not considered to be bad, but it's not good either.
In other words, if you have a fair credit score, there's some room for improvement but no need to despair. But if you want to start seeing your score inch closer to "good" or "excellent," then you'll need to establish some new credit behaviors. These cards can help you do that.
1. The Best Card for Rewards on Gas and Dining
Discover it® Chrome Offers Rewards for Common Spending
Discover it® Chrome rewards you for your everyday purchases. With this card, you can get two points per dollar spent on gas and dining out (up to the first $1,000 spent combined in these two categories; 1% thereafter). You can also get one point per dollar on all other purchases.
Even better, the cash rewards never expire. They can also be redeemed for gift cards, merchandise, and statement credits. (A statement credit is basically a reduction in your account balance.) That's some serious flexibility.
How to Choose - and Get Approved for - the Right Rewards Card
Rewards cards are a great way to earn money based on the spending you were going to do anyway. Those rewards can then be used to earn points, earn miles, or gain cash back. In other words, your credit card may pay you for the money you're spending. Not a bad deal, right?
Here's the thing, you generally need a good credit score to qualify for a rewards credit card. Why? Because the card issuers don't want to pay rewards to someone who may be high risk (i.e. someone who may not be able to make their payments).
However, if you can prove that you're a low-risk borrower, you can get approved. With that approval, you'll get to choose from a variety of rewards. Think things like gift cards, free airfare, free hotel stays, and statement credits.
There's even better news. You don't have to carry a balance on your credit card to earn rewards (or to improve your credit score). All you have to do is use your credit card for the qualifying purchases.
Generally, credit cards with better rewards programs require a good or excellent credit score. If you're currently in the fair range, that may seem like a lofty goal.
It doesn't have to be. Improving your credit score from fair to good can come down to simply lowering your card balances. Why? Because something called credit utilization makes up more than 30% of your score. All that means is that you're evaluated based on the amount of debt you owe in comparison to the credit you have. An ideal credit utilization rate is 30% or below. If you can start paying down your credit card balance, then you'll see a nice uptick in your score.
Once you have your credit score ready for a rewards card, there's some more work to do. Think about your spending habits and the types of rewards that will benefit your life. For example, a card that pays you for using your card at a gas station won't help you if you ride your bike to work every day. And a credit card that offers airline miles as a reward won't help you if travel isn't a top priority in your life.
So how can you decide what type of rewards card will work for you? Start by reviewing the past 6-12 months of spending on your current credit card or bank statement. Categorize your purchases. Where are you spending most of your money? What types of rewards could help you save the most money? Or what types of rewards will help you reach your spending goals and desires? When you've answered these questions, review different cards to find the best for you.
How to Maximize Your Rewards When You Shop
Once you get your rewards card, set up your spending in a way that will help you maximize your rewards. The first step in doing this? Learning all about purchase categorization.
Purchase categorization refers to how credit card issuers categorize what you buy. And it's now always what you'd expect. Rewards are generated based on where a purchase is made, not on what you buy. For example, if you earn rewards for shopping at gas stations, anything you buy at a gas station counts. But that doesn't mean you have to buy gas specifically. You can buy snacks, magazines, and toiletries. As long as the purchase is made at the gas station, it counts for that purchase category.
Once you get this strategy, you can earn more rewards by making the bulk of your purchases at the right places.
Of course, there's a flip side to this. You may think a purchase is eligible if made at a retailer that falls under the purchase categories. But some stores may be exempt or fall into an unexpected category. Before you finish your strategy, read the fine print to see where your favorite stores stand.
While you're reading the fine print, look out for restrictions that may exist on your rewards. For example, your card may impose a maximum amount of a certain type of reward. Your card may also give a time limit within which your purchases must fall. There are also times when unredeemed rewards may expire. Make sure you know all the ins and outs of your rewards program so you can maximize your rewards as much as possible.
Best Runner-up Credit Cards for Rewards
Do you spend a great deal of your money on utilities? Since these are the types of spending that most of us can't avoid, they can be a great way to earn more rewards. Why not get paid for the spending you were going to do anyway?
Below are some of the best credit cards for utilities and more. Check them out to see if they might offer you the types of rewards you're looking for.
2. The Best Cards for Paying Off Debt
Chase Slate® Provides Free Balance Transfers at 0% APR
Chase Slate® is the best card for fair credit that helps you reduce or eliminate debt. How can this credit card help you pay off other credit cards? With a solid introductory APR and no-fee balance transfers. (To avoid a balance transfer fee, you must complete the transfer within the first 60 days.)
With this offer, you can transfer your debt to Chase Slate® and make monthly payments free of interest. Just make sure you're paying well over the minimum due. If not, you could end up in debt for much longer when the introductory rate expires.
Another perk: This card also offers free monthly FICO credit scores. That means you can track your credit score (read: watch it improve) while you pay your balance down.
Balance Transfers for Eliminating Debt
A balance transfer credit card that offers an introductory APR of 0% and no balance transfer fee is the best way to go for paying off debt. This enables you to consolidate debt (if you have more than one card to pay off). It also enables you to work on paying your debt off interest-free (for the duration of the introductory period).
There is one caveat, though. Your balance transfer amount cannot exceed your credit card’s credit limit. That means you'll want to find a balance transfer credit card that can cover all your credit card debt. If that's not possible, aim for the card with the longest introductory period.
Once you've found the right balance transfer card for you, the process is simple. You'll apply for the card the same way you would apply for any other credit card. When approved, you'll be given a form (in person or online) to fill out to complete the transfer. This form gives your card issuer permission to buy your balance from your other credit card (or cards). After that, the process usually takes 7-10 days to complete.
Get Rid of Debt While Improving Your Credit Score
We've already talked a little bit about how you can improve your credit score. Much of it really does come down to paying down (or off) your debt. Since credit utilization makes up such a large part of your score, improving it can greatly improve your score. (Of course, it can also great improve your finances overall).
Paying down or paying off debt is always easier said than done. Interest rates take up such a large chunk of your payments that it can feel like debt will be a lifelong battle. But it doesn't have to be that way. If you set up a targeted plan to pay it down and also obtain a balance transfer card to lower your interest rate, your payoff will speed up over time. It's all about getting ahead of those interest rates and building momentum as you go.
Since debt payoff can take awhile, it can be hard to see that momentum. That's what makes the free credit score feature that cards like Chase Slate® offer so great. Even if it takes longer than you want to decrease your balances, making your payments on time and reducing your balance will have a positive effect on your credit score. As you watch that credit score number go up while your debt goes down, you'll be able to build that motivation you'll need for the payoff process.
A FICO Credit Score is Made Up of Five Components
While credit utilization makes up a large part of your credit score, it's not the only factor. There are five factors that make up your credit score, which you can see in the table below:
Credit Score Ranges and Quality
|Credit Score Ranges||Credit Quality||Effect on Ability to Obtain Loans|
|300-559||Very Bad||Extremely difficult to obtain traditional loans and line of credit. Advised to use secured credit cards and loans to help rebuild credit.|
|560-649||Bad||May be able to qualify for some loans and lines of credit, but the interest rates are likely to be high.|
|650-699||Average/Fair||Eligible for many traditional loans, but the interest rates and terms may not be the best.|
|700-749||Good||Valuable benefits come in the form of loans and lines of credit with comprehensive perks and low interest rates.|
|750-850||Excellent||Qualify easily for most loans and lines of credit with low interest rates and favorable terms.|
Working on all of these factors can improve your score. But payment history and credit utilization are where you'll see the fastest progress.
Runner-up Credit Cards to Pay Off Debt
If you've tried the Chase Slate® and weren't approved - or if you decide it's not the right balance transfer card for you - don't worry. There are plenty of fish in the balance transfer sea! Check out a few other top balance transfer credit cards to see if any might fit your needs.
3. The Best Cash Back Card for Fair Credit
Capital One® Quicksilver®One Offers A Simple Cash Back Program
The Capital One® Quicksilver®One Cash Rewards card is the best card for fair credit that gives generous cash back rewards. The card offers unlimited 1.5% cash back on every purchase. That means you don't have to worry about purchase categorization or loads of fine print. Just use the card for your regular purchases and start accumulating that cash back.
There is a $39 annual fee for this card, but as long as your rewards exceed the fee, then this card is well worth the price.
How Cash Back Credit Cards Work
A cash back credit card is a type of rewards credit card that focuses on just one reward: cash. Usually, your rewards will accumulate up until you've met minimum redemption amounts. These amounts typically hover around $20 or $25.
How can you get your cash back? This varies based on the credit card you choose. Some mail you a check, some give you a statement credit on your credit card, and some do direct deposit. It's just as important to find right rewards redemption for you as it is to find the right cash back rewards card for you. Cash back programs may vary from credit card to credit card. Some cards provide higher cash back rates on particular purchases while other cards offer cash back at a flat rate. Some still will even offer a mix of both. In general, many cash back credit cards have a flat 1% cash back rate.
Annual Fees are Common for Fair Credit Scores
Wondering what's the point of cash back if you have to pay an annual fee to get it? Here's the good news and bad news: the annual fees will vary based on your credit score.
While your score sits in the "fair" range, you're more likely to pay a fee. Again, if the fee is less than the amount of rewards you'll earn, then it could be well worth it. But, as you use your credit card (assuming you keep your balance low and pay on time), your score will improve. As that happens, you can apply for rewards cards that don't come with an annual fee. Like all financial goals, it's a process. Be consistent and stick with it and you'll see the results you want.
Runner-up Cash Back Credit Cards
Cash back credit cards are wildly popular, which means you get a ton of options to choose from. Before you decide on the cash back credit card that will work for you, review some of the options below. This is a relationship that you'll want to stick with for awhile, so make sure you pick the best one for you.
No Credit Score is Forever
You may have noticed that there are a variety of options available to those with fair credit scores. You may have also noticed that some of them come with higher fees or stricter approval processes. The good news is, you still have a lot to choose from. And these are options you can then use to systematically improve your score over time.
And that's what you should focus on: how you can improve your credit score over time. No credit score is forever. With consistency, you can get your score up to good and even excellent within six months to two years. And it's not even that difficult to do. Just keep paying on time, keep those balances as low as possible, and check your score as you go. Pretty soon, you'll be heading into credit score and financial success.
Credit Card with Fair Credit
|Credit Card||Notable Feature||Who It's Best For|
|Barclaycard Rewards||Rewards credit card for people without great credit.||People with poor to average credit who want to earn rewards on spending.|
|American Express EveryDay||Earn bonus rewards at supermarkets.||People who shop frequently at supermarkets and use the credit card at least 20 times per month.|
|Discover it Chrome||Earn bonus cash back at gas stations and restaurants.||People who drive and eat out often.|
|Chase Slate®||Introductory offer tends to include 0% APR on balance transfers for an extended period of time. Also, balance transfer fees are waived during the first 60 days||People who are trying to pay down their high-interest debt quickly through the use of debt consolidation.|
|Citi Simplicity||Lengthy 0% APR intro period on purchases and balance transfers.||People who need to finance a major purchase or consolidate debt.|
|Bank Americard||Simple credit card with a long 0% intro APR period.||People who want a simple credit card that also allows to minimize interest charges on a major purchase.|
|Capital One® Quicksilver®One Rewards||Earn 1.5% cash back on all spending, but there's an annual fee.||People with average credit who want to earn simple cash back rewards on their spending.|
|Discover it® Secured||Secured credit card that can help rebuild credit with no annual fee.||People with bad credit who want to repair their credit profile while also earning cash back on spending.|
|Credit One Bank® Platinum Visa||Rebuild credit without a security deposit.||People with bad credit who cannot afford a security deposit for a secured credit card.|