Best Credit Cards for 550 to 600 Credit Scores

Oct 13, 2016 | Be First to Comment!

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With a credit score of 550 to 600, there is plenty of room for your credit to improve. If you have good credit, banks may welcome you with open arms and offer some of the best terms. But, you may not receive this type of treatment in this credit score range.

One of the best ways to increase a low credit score is to use the right credit card. Generally, it can be tough to get approved for a credit card when your credit scores aren’t the highest. There are specific credit cards that are designed to help you raise your credit, given that you use them responsibly.

If your credit score is between 550 and 600, we’ve picked the best credit cards that can help you to build or repair your credit:

Discover It® Secured Credit Card

The Discover it® Secured Credit Card is one of the few secured credit cards that happens to have no annual in addition to a cash back program. It is also known for being extremely fee-friendly.

The cash back program offers 2% cash back at gas stations and restaurants, which are two very popular spending categories. Meanwhile, all other purchases earn a flat 1% cash back rate. Credit cards that are designed for people less-than-average credit scores will rarely offer any type of rewards.

The card doesn’t charge a penalty APR or late payment fee for your first late payment. To help you track your credit progress, you get a free FICO credit score printed on every monthly statement. As a bonus, you can take advantage of other Discover card benefits, such as $0 fraud liability, no foreign transaction fees, no over-the-limit fee, and your cash back never expires.

Capital One® Secured MasterCard®

The Capital One® Secured MasterCard® is a secured credit card best known for its low minimum opening security deposit. A $49 security deposit will instantly grant a $200 credit line. To get a credit limit of more than $200, you’ll have to put in a larger security deposit. By proving a habit of making on-time payments you may qualify for future credit line increases without the need for more deposits.

The card comes with no annual fee. It also comes with MasterCard benefits like an extended warranty, auto rental insurance, travel accident insurance, 24/7 roadside assistance, and price protection.

Open Sky® Secured Visa® Credit Card

The OpenSky® Secured Visa® Credit Card stands out because it is a secured credit card that does not require a bank account. With most other secured credit cards, a savings or checking account is needed. Instead, the security deposit can be funded through wire transfer and money order.

The card can be helpful for people who don’t have a regular bank account when they apply for a secured credit card. Additionally, your credit reports are not checked during the approval process.

Wells Fargo Secured Visa® Credit Card

The Wells Fargo Secured Visa® Credit Card is ideal for people who are able to put down a large security deposit -- up to $10,000. The typical secured credit card allows a credit line of $3,000 to $5,000. The high credit limit will allow you to make bigger credit card purchases, but it’ll also contribute to the faster growth of your credit score.

This secured card features a $25 annual fee. And, Wells Fargo will review your account periodically to see if your account can be converted to a regular unsecured credit card.

What is Your FICO Credit Score

A FICO credit score is the credit score used by the majority of U.S. lenders. It is an important part of your finances that they review to determine if you are trustworthy enough for a credit card, loan, or any other type of credit line.

FICO stands for the Fair Isaac Corporation, the company that created the formula behind the FICO credit score. Each credit score is calculated based on the data that is in your credit reports. Your FICO scores may be different depending on the credit reports pulled. For instance, there are three major U.S. credit bureaus -- Equifax, Experian, and TransUnion. You might get a different credit score from each one.

FICO doesn’t reveal the top secret formula for your credit score. However, the factors that make up your score are available to the public.

FICO credit score factors Percentage weight on credit score: What it means:
Payment history 35% Your track record when it comes to making (at least) the minimum payment by the due date.
Amounts owed 30% How much of your borrowing potential is actually being used. Determined by dividing total debt by total credit limits.
Length of credit history 15% The average age of your active credit lines. Longer histories tend to show responsibility with credit.
Credit mix 10% The different types of active credit lines that you handle (e.g., mortgage, credit cards, students loans, etc.)
New credit 10% The new lines of credit that you've requested. New credit applications tend to hurt you score temporarily.

FICO credit scores range from 300 to 850. The higher your score, the higher your creditworthiness.

What is a Bad Credit Score

A credit score between 550 and 600 is considered bad credit. Such a score may be the result of negative remarks on your credit reports, including missed payments, bankruptcy, and other delinquencies.

With bad credit, it can be difficult to get approved for credit cards, loans, and other lines of credit. Lenders may be cautious with lending to people who have struggled with repaying their debt. Even if you do qualify for a credit line, it is likely that you’ll face high fees, interest rates, and less friendly terms.

How Your Credit Score Can Affect Your Future Mortgage Rate

Credit Score Range 30-Year Fixed Rate Mortgage 5-year fixed rate mortgage 7/1 ARM
620-639 4.684% 4.016% 4.506%
640-679 4.138% 3.47826% 3.96%
660-679 3.708% 3.04% 3.53%
680-699 3.494% 2.826% 3.316%
700-759 3.317% 2.649% 3.139%
760-850 3.095% 2.427% 2.917%

How Your Credit Score Can Affect Your Next Car Loan

Credit Score Range 60-Month new Car Loan 40-Month Used Car Loan
500-589 14.824% 16.325%
590-619 13.74% 15.086%
620-659 9.398% 10.186%
660-689 6.747% 7.599%
690-719 4.656% 5.322%
720-850 3.331% 3.778%

How Your Credit Score Can Affect Your Next General Loan

Credit Score Range HELOC Home Equity Loan
620-639 10.680% 10.164%
640-669 9.180% 8.914%
670-699 7.680% 7.414%
700-719 6.305% 6.639%
720-739 5.055% 6.139%
740-850 4.680% 5.837%
There are ways to repair your bad credit. One of the most convenient ways to do so it through secured credit cards.

The Basics of a Secured Credit Card

A secured credit card is designed for people who cannot obtain a traditional unsecured credit card. A secured credit card requires that you provide cash as a security deposit, which is normally held in a bank account that is partnered with the lender.

The security deposit acts as collateral in the event that you don’t pay off your balance. This is the reason that lenders are willing to offer secured cards to people with bad credit. Your credit line (the highest possible balance on your card account) is usually equivalent to your security deposit. Therefore, the larger the security deposit, the larger your credit line.

With a secured credit card, the deposit is not used to pay your monthly bill. Secured credit cards tend to come with annual fees and high interest rates. Rewards programs and premium benefits are rare because the main focus of a secured card is to rebuild credit.

Other than the security deposit, a secured credit card works mostly like a typical credit card. Usually, your account activity is reported to the U.S. credit bureaus. It is crucial that your card issuer does this in order for you to repair your credit.

Many banks will review secured credit accounts on a regular basis, usually every 6 to 12 months. If they believe that you’re ready for it, they may offer to convert your secured credit card account to one that is unsecured. Or, they may simply offer to refund your security deposit and eliminate any annual fees. In either case, it means that you’ve proven that you’re able to be responsible with credit again.

Otherwise, you may try to apply for a regular credit card once you feel that your credit score is high enough.

How to Use a Secured Credit Card for a Higher Credit Score

After qualifying for a secured credit card, normal usage should suffice to improve credit scores. However, to raise your credit score quickly, here are tips that can you follow:

  • Set up automatic bill payments. Credit card accounts allow customers to automate their monthly bill payments. This way, you’ll never miss a payment, which is important for improving your credit and increases your chances that the lender will allow you to graduate to an unsecured credit card.
  • Put down the highest security deposit possible. Because your credit limit is equal to your security deposit, a large security deposit results in higher borrowing potential.
  • Use your card, but keep balances low. By maintaining low statement balances, it will appear as if you’re using only a small percentage of your credit limit. It shows that you can keep your credit card spending and debt under control.
  • Keep the account open for as long as possible. When you’re ready to graduate to an unsecured card, reconsider closing the secured credit card. This action would slow down the progress of your credit improvement because the account age stops growing. If you can simply convert the secured credit card with the same issuer, the account age continues to increase.

In the end, your score is only as good as your credit habits, so you may want to review the fundamentals of good credit management, such as paying bills on time, limiting debt, checking your credit report for errors, and limiting credit inquiries.

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