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Lenders use credit scores to get a snapshot of a consumer’s financial history. The credit score reflects numerous factors, including length of credit history, whether a customer makes payments on time, debt load and diversity of credit options (including revolving credit such as credit cards and installment loans, which include student loans, auto loans and home mortgages). Filing for bankruptcy or having credit cards turned over to collection agencies for non-payment can have a deeply negative impact in credit scores. Low credit scores make it difficult to obtain a new credit card.
The most common credit score formula is the FICO score. Under this model, the range for excellent credit scores is 720 and higher; the range for bad or no credit is 599 and below. Good credit ranges from 670 to 719, and average credit scores range from 600 to 669.
Credit scores translate to credit ratings; the higher the credit score, the better the rating and greater eligibility for preferred credit cards. A-ratings involve credit scores exceeding 720; this includes consumers who have maintained good credit for two to five years and haven’t made a late credit card payment more than once in the past three years. The minimum credit score for a B-rated credit card is 620, and consumers cannot have made a late payment more than twice in the past three years. C-rated consumers with a minimum credit score of 580 may have trouble being approved for a credit card; co-signers may be required. The D-rating means that consumers may struggle to receive credit card approval; the minimum score for this rating is 550. E-ratings with credit scores below 550 are unlikely to be approved for a credit card.
Some cards will accept consumers with bad credit or no credit, including scores below 599. These cards may secured, meaning that customers must place an amount of money equal to their balance limit in the bank before lenders will issue a credit card. These cards may also have lower balance limits and higher interest rates. Consumers with average credit (above 600) may qualify for cards with more attractive terms. If your credit score is good, types of credit cards available to you may include those offering lower interest rates, higher balance limits and benefits programs. Perks may include cash back on purchases, travel points or vouchers for retail items such as electronics equipment. To qualify for preferred credit cards, consumers may be expected to have already held and successfully managed a credit card with a balance limit of $5,000 or more.
Even if you maintain the minimum credit score for a credit card, banks may still deny your application. Recently filing for bankruptcy or accruing multiple delinquent credit cards can convince lenders that you’re too risky for approval. Income and employment status may also be factors.