If you’re wondering why you get — or don’t get — certain credit card offers, take a closer look at your credit scores.
Credit card issuers rely on credit scores and other data to decide which credit cards you’re qualified for. The stronger your scores, the more likely it is you’ll be offered the most desirable rewards cards with the highest credit limits. Credit cards are available to consumers at all levels of credit. But to get approved for the best cards, you’ll need good credit.
[Read: Best Cash Back Credit Cards.]
Why Credit Scores Matter
A credit score is a vital piece of data for credit card issuers because it helps them understand your financial history and ability to take on — and pay back — financial obligations.
Your credit score, whether from FICO or VantageScore, is based on information in your credit report. The report is made up of data from lenders you do business with, such as the company that holds your home or auto loan or credit card issuers.
“(Lenders) all benefit from the sharing of information,” says John Ulzheimer, a credit expert who formerly worked for FICO and credit bureau Equifax. The credit report “tells a story of how risky you are and whether other issuers should do business with you.”
Positive information from a credit card company shows you paid your bills on time, which Ulzheimer says could justify giving you access to more credit.
How Credit Scores Are Calculated
There are multiple versions of FICO and VantageScore, which means there are several — likely similar — scores available to lenders. Credit card companies might use a score from either one or both of the companies to decide whether to offer you a card and which one might be most appropriate.
Both FICO and VantageScore rely on some common data points, roughly from most to least important in this order:
— Payment history. Have you paid your bills on time or do you have missed or late payments? The more recent the missed payment, the larger the effect it will have on your score.
— Amount of debt. Are you holding large balances on multiple cards and are those balances close to your total credit line? If so, that could drag down your score. Experts typically encourage consumers to keep their utilization rate, referring to the proportion of the credit line you use, to 30% or less.
— Length of credit history. What is the average age of your accounts? The older, the better.
— Searching for new credit. Have you recently opened new credit cards and applied for several new lines of credit? Both could negatively affect your score.
— Credit mix. It’s a plus to have a combination of installment loans, such as personal, mortgage and auto, and credit cards.
The Credit Score You Need for a Credit Card
There is no threshold credit score that signals that you’re ready for a credit card. Card issuers will review your score in combination with other data to determine whether to accept your application or send you an offer.
The average FICO score, for example, is 704, according to a 2018 blog post from the company, but consumers can obtain many types of credit cards if they’re well below that score. There are starter cards for consumers who haven’t established credit yet, and credit card options for fair or bad credit.
However, your choices may be limited if you don’t have at least good credit. Many credit cards require good to excellent credit to qualify. A good FICO credit score is 670 or higher, or 700 or higher on VantageScore.
TransUnion, one of the three major credit reporting bureaus, found that the number of cards issued to people in the subprime category — which is a VantageScore of 600 or below — increased in late 2018. There was a 4.3% rise in subprime borrowers getting access to credit cards in 2018, which helped lead to a record 178.6 million consumers who had access to credit cards at the end of 2018, according to company data.
[Read: Best Store Credit Cards. ]
Credit Cards for Bad Credit
The primary credit card options for consumers are unsecured and secured cards. Unsecured are the most common type of cards, but secured cards might be the best bet if you don’t have good credit.
Unsecured cards allow cardholders to make purchases and pay for them each statement period or over time, but they are the riskiest for lenders since there is no property or money guaranteeing the debt. Secured cards, however, require the consumer to pay a deposit to the issuer, which will be tapped if the consumer doesn’t make payments on time.
Since secured cards are less risky for lenders, approval is easier and the APR could be lower than unsecured cards for people with a subprime credit score, according to U.S. News data. The credit line might be small, but a secured card can allow cardholders to access credit and improve their credit score.
TransUnion data shows that the average credit card line for new subprime consumers was $987 in the fourth quarter of 2018.
“If you think of your typical subprime and near-prime consumers, these are consumers that may have history of missing or skipping payments over time,” says Paul Siegfried, senior vice president and credit card business leader for TransUnion. “When they do that, it’s good to have a provider who understands them. Not all lenders are positioned that way.”
In addition, there are student cards that allow young people who have yet to establish a strong credit history to build one. Some include rewards, such as cash back.
Subprime cardholders are likely to have a higher utilization rate, which makes it tough for them to improve that credit score factor. TransUnion data indicates subprime consumers have an average utilization rate of 84%, which is much higher than the 30% or lower utilization rate recommended by experts.
“They might be in a position where, because of liquidity needs, it’s hard for them” to keep their credit card utilization percentage low, Siegfried says.
It might be a similar story for near-prime borrowers, which TransUnion defines as consumers with a VantageScore of between 601 to 660. The average new credit card line for near-prime borrowers was $2,694 in late 2018. This may not allow for a lot purchases before they get close to the credit line.
Credit Cards for Fair Credit
As a consumer’s credit score improves, credit card options increase.
One option for people with fair or near-prime credit is retail credit cards. These store credit cards are co-branded with a retailer. And they may have lower credit lines and higher APRs, Ulzheimer says.
“Those cards are usually easier to get for people with less-than-stellar credit because they have subprime terms,” Ulzheimer says.
Siegfried says consumers at this level “tend to revolve a balance and tend to get a card for specific purposes — such as home improvement store financing for new washer-dryer set. Maybe they’ll get a $4,000 credit line for a $1,200 set, then pay that down over time.”
Consumers with fair credit might qualify for unsecured cards that have lower credit lines and higher APRs to start, but these cards can be adjusted once the cardholders show they can handle regular payments. For example, the Capital One Platinum Credit Card allows for a higher credit line to borrowers who make their first five payments on time.
Credit Card Options for Good or Excellent Credit
Once you reach good credit, you will have “a really good universe of cards to select from,” Ulzheimer says. You can choose from more cards from major issuers, like American Express, Chase and Discover.
Rewards-related cards become more available for consumers who are in the prime score area, Siegfried says.
[Read: Best Gas Credit Cards.]
Credit card issuers try to outdo each other to capture the interest of consumers with excellent credit.
The card issuers are much more aggressively marketing toward this group “because they know these people will pay their bills on time,” Ulzheimer says.
For example, the average new credit line for prime-plus borrowers (a VantageScore of 721 to 780) was $7,619 in the fourth quarter of 2018. It was just over $10,500 for super-prime (781 to 850), according to TransUnion.
If you have a high credit score and frequently use your credit card for travel and other major expenses, a premium credit card is likely your best bet. They may offer robust rewards and benefits, such as airport lounge access and annual travel credits.
Issuers may also offer people with high credit scores the opportunity to pay 0% interest on balance transfers, purchases or both for a limited time.
“If they let you have a balance transfer for a period of time with no interest, it’s a really good deal,” Ulzheimer says. “It’s an interest-free loan for a period of time.”
These top-tier cards might come with annual fees, but the rewards are usually well in excess of what you would be paying, Ulzheimer says.
But if you’re not at the good or excellent credit level, you do still have options, though you’re not likely to get as many perks. Your options will get better if you’re able to improve your credit rating.
More from U.S. News