How do Unsecured Credit Cards for Fair Credit Work

Fair credit essentially means neither a very good nor a very bad credit score. Before the economic recession hit in 2008, this was around 650 to 680. Today, banks and financial institutions have made the approval process for a credit card much more stringent. There are several factors which they take into consideration while going through your application. They have their own internal credit scoring model besides going through your report. Say a person has a credit score of 695 now, but 5 years back he had filed for bankruptcy. The criteria that banks would apply for him would be different compared to another person who has very little to show in terms of credit history but has a similar score.

It’s not that you won’t be approved for a loan with a fair credit score, but the rates of interest would be higher. So it’s always better to improve your score to such an extent that you would be approved one with a lower rate of interest, and what better than an unsecured credit card. No doubt, you will pay a higher interest rate, but it’s worth paying now and being approved for a higher amount of loan with a lesser rate in the future. Of course, there are alternatives like getting a secured card, but for that, you will need to pay a security deposit amount initially, which may not excite many. So, unsecured cards would help you in your endeavor of getting into the good books of rating agencies.

Fees and Charges

While searching for one, you may not be able to find a lender who is willing to approve one without an annual fee. There may be other fees as well, so you need to check out for that. One time application fees are charged by several financial institutions, which can go up to a few hundred dollars. In addition to that there may be a one time processing fee, so as to forward your application. On top of that, there may also be a monthly fee which may range between USD 5 – 15 or even more. Once you have been regular in your payments for a sufficiently long time, you can get a card with no annual fee.

Things to Remember

It is important to search for the best deal available as there are many providers in the market. Ask for quotes from as many of them as possible so that you have a list of all the offers available, and then choose the one which suits you. Moreover, check the past record of the issuing company, what people have to say about the service, etc. Check whether your payments are reported to all the three credit bureaus, because your aim is to improve your score. In future, you don’t want higher fees to be associated with your card, so it’s important that these agencies come to know of your payment history.