4 Signs You May Need a Credit Card for Bad Credit

It’s hard to miss the credit card offers on television advertising flashy rewards, fancy perks and celebrity endorsements. While these cards do feature great benefits, the hard truth is they are generally only available to those with excellent credit.

Those with bad credit are limited to credit cards for people with poor credit. These may not have bells and whistles you want, and interest rates will be higher, but they do offer the opportunity to build better credit and can serve as a backup in emergencies.

Here are four signs you may need a credit card for bad credit:

1. You don’t have much in savings.

Life always throws emergencies our way. Having an emergency savings fund you can pull from is always the best strategy, but if your savings are low, it’s smart to have a credit card to fall back on rather than having to take out a loan. Just remember that if you can’t pay it off quickly and are forced to carry a balance, you will have to pay interest — and interest fees are high on credit cards for bad credit. So only borrow what you absolutely have to, and pay it back as soon as possible to make this card a true benefit.

2. You can’t qualify for a regular credit card.

If you have tried to apply for a credit card for fair credit or good credit and were rejected, that’s a sign you may need to apply for a bad credit credit card instead. They are geared toward people with low credit scores, so it’s easier to be approved for them. If you aren’t able to qualify for this type of card, you may need to try for a secured credit card instead.

3. You have had debt in collections or bankruptcy.

These types of problems can damage your credit for years to come. If you have had to file for bankruptcy or deal with a collections agency in the past few years, chances are you won’t qualify for a regular credit card. A credit card for bad credit is likely the best option for you until marks from collections or bankruptcy are no longer on your credit report.

4. You need to build better credit.

Whether you have bad credit from some financial blunders, or no credit at all, using a credit card for people with poor credit is the ideal way to start building positive credit history. Your activity is sent to the three credit bureaus that create credit reports, so when you make a smart move like pay a bill on time, it helps boost your credit score. With time, your credit will improve and you may be able to qualify for a credit card with rewards or other perks.

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Credit Cards for Fair Credit

Fair credit is the awkward teenager of the credit world. People with fair credit scores have graduated past secured credit cards, but still don’t have the choice of credit cards that those with good credit have. But there are several good card options if you’re stuck in the middle. Here are the Nerds’ top three rewards credit cards for fair credit.

Barclaycard® Rewards MasterCard®: Best for bonus rewards on everyday purchases

The Barclaycard® Rewards MasterCard® offers 2 points on every $1 spent on gas, grocery and utility purchases and 1 point on every $1 spent on everything else. Points can be redeemed for anything, you use them like cash to cover purchases you’ve made, provided those purchases have been made in the last 30 days and cost $25 or more.

Barclaycard® Rewards MasterCard®
Apply Now on Barclays's secure website starstarstarstarhalfstar	No annual fee Earn 2 points per $1 on gas, grocery, and utility purchases and 1 point per $1 everywhere else Use the points you earn like cash to pay for almost any purchases you've made. No redemption fees, no limit on the points you can earn and no complicated set up. Reports to all 3 major credit bureaus monthly providing you the opportunity to rebuild your credit score Complimentary FICO® Credit Scores as a benefit to active cardmembers. Opt-in to have instant and convenient access to FICO® Scores from your Barclaycard online account.		thumbsupPros Qualify with average credit No annual fee thumbsdownCons High APR

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$0	None - after first purchase	Min APR: 24.99%	Purchase: None Transfer: None

NFL Extra Points Credit Card: Best for football fans or cardholders who need a balance transfer

The NFL Extra Points Credit Card offers 2 points on every dollar spent on NFL or team purchases — such as tickets and team merchandise — and 1 point on every dollar spent elsewhere. There’s also a signup bonus: Earn 10,000 bonus points after $500 in purchases in the first 90 days, enough to redeem for a $100 cash back statement credit. Points can be redeemed for VIP NFL experiences, game tickets or cash back.

Football fans will enjoy 20% off every purchase at NFLShop.com. Your card design will feature the colors and logo of your favorite team — all 32 teams are available. You’ll also receive an introductory APR of 0% on ticket purchases for the first six months.

While the NFL Extra Points Credit Card seems like it’s exclusively for football fanatics, it’s a great card for anyone with average credit. The card boasts an introductory APR of 0% for 15 months on balance transfers made in the first 45 days and an annual fee of $0.

NFL Extra Points Credit Card
Apply Now on Barclays's secure website starstarstarstarstar	Earn 10,000 bonus points after $500 in purchases in the first 90 days, enough to redeem for a $100 cash back statement credit 0% promotional APR for 6 months on ALL ticket purchases from a team ticket office. After that, a variable APR currently 14.99%, 19.99% or 24.99%, based on your credit worthiness Earn 2 points per $1 on NFL or team purchases - game tickets, in-stadium and at team Pro Shops - and 1 point per $1 on all other purchases 20% off every purchase at NFLShop.com - that's $20 off every $100 you spend Redeem points for VIP NFL experiences, game tickets or 1% cash back statement credits beginning at 2,500 points for a $25 statement credit All 32 team cards are available, customized with your favorite team's colors and logo 0% introductory APR for 15 months on balance transfers made within 45 days of account opening. After that a variable APR, currently 14.99%, 19.99% or 24.99%, based on your creditworthiness		thumbsupPros Qualify with average credit No annual fee 0% for 15 mos on transfers

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$0	Earn 10,000 bonus points after $500 in purchases in the first 90 days, enough to redeem for a $100 cash back statement credit	14.99%, 19.99% or 24.99%* Variable	0% on balance transfers for 15 months (must be completed within first 45 days of account opening)

Capital One® QuicksilverOne® Cash Rewards Credit Card: Best for straightforward rewards

The Capital One® QuicksilverOne® Cash Rewards Credit Card offers 1.5% rewards on every purchase. You can redeem your rewards for cash back in any amount, at any time. There’s no need to opt in to rewards or keep track of rotating quarterly categories.

The Capital One® QuicksilverOne® Cash Rewards Credit Card has an annual fee of $39, which will be negated after spending $2,600 per year. It boasts an introductory APR offer of 0% on purchases and balance transfers until September 2015, and then the ongoing APR of 22.9% (Variable).

Capital One® QuicksilverOne® Cash Rewards Credit Card
Apply Now on Capital One's secure website starstarstarhalfstar	Earn unlimited 1.5% cash back on every purchase, every day No rotating categories and no sign ups needed to earn cash rewards Redeem the cash back you earn for any amount, any time Cash back doesn't expire and there's no limit to how much you can earn 0% intro APR on purchases until September 2015; 22.9% variable APR after that Get access to a higher credit line after making your first 5 monthly payments on time Fraud coverage if your card is ever lost or stolen Get free access to your credit score and learn how everyday decisions can affect your score using Capital One® Credit Tracker		thumbsupPros Qualify with average credit High rewards rate 0% for 9 mos on transfers No foreign transaction fee thumbsdownCons Has annual fee

Annual Fee	Signup Bonus	APR , Variable*	APR Promotions
$39	Earn unlimited 1.5% cash back on every purchase, every day.	22.9% (Variable)	0% on purchases and balance transfers until September 2015

Bottom line: Fair credit? No problem! With one of these three credit cards, you’ll be able to successfully navigate through the trials and tribulations of being stuck between bad credit and good credit. Use your new card responsibly, and we’re sure you’ll enter the ranks of good credit score holders in no time.

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Apply for a Credit Card in 5 Simple Steps

If you’re ready to apply for a credit card for the first time, you’re in luck. The Nerds have put together a step-by-step guide with everything you need to know to make the most of the experience.

Ready to get started? Let’s dive in.

Step 1: Know how credit cards work

First, it’s important to understand how a credit card works. Unlike a debit card, which immediately deducts funds from your checking account when you swipe, using a credit card requires you to borrow a small sum of money. Every time you run it, you’re essentially taking out a miniature loan from the bank that issued you the card. At the end of the month, you have to pay that loan back.

But unlike other loans, which require you to make a hefty payment of pre-determined amount of money every month, your issuer will give you the option to just pay a very small fraction of what you owe. You should not take this option. By only making the minimum payment on your card, you’ll be racking up big interest charges when the rest of your balance rolls over to the next month.

The takeaway? Pay your credit card bill on time and in full every month – no exceptions!

Step 2: Do your research

Apply Now

on Chase's

secure website

Now it’s time to figure out which card is right for you. There are a lot of options on the market these days, so shopping around is essential.

To get started, check out our handy credit card comparison tool. Be sure to scroll down and work through some the questions on the page – they will help guide you to a card that suits your needs.

If you’re looking for a quick recommendation, the Nerds like the Chase Freedom® - $200 Bonus for credit card newbies. With it, you’ll earn 5% cash back in rotating quarterly bonus categories, up to $1,500 spent per quarter. You’ll also earn unlimited 1% cash back on all other purchases.

Historically, the Chase Freedom® - $200 Bonus has featured retailers like Starbucks, gas stations, Amazon, restaurants and department stores as 5% bonus categories, so there’s something for everyone to love. Plus, unlike most other cash-back cards, this one comes with a signup bonus: Get a $200 Bonus after spending $500 on purchases in your first 3 months from account opening.

Given its lucrative and easy-to-use rewards structure and its annual fee of $0, you can’t go wrong with the Chase Freedom® - $200 Bonus as a starter card.

Step 3: Apply for a credit card using an online form

When you’ve selected a card you’re comfortable with, it’s time to move forward with the application. The easiest way to do this online; you’ll simply visit the issuer’s website, find the card you’re interested in and click on its “apply here” link. Or, you can use one of the “apply here” links in a NerdWallet article – we’ll take you directly to the credit card application you need.

Either way, you’ll land on an application form, where you’ll input your personal financial information. Typically, you’ll be asked to provide:

• Your name, address, and phone number


• Your Social Security number


• Bank account information (i.e., whether you have a checking account, savings account, or both)


• Your employment and income details

At the end of the form, you’ll see a copy of the card’s terms and conditions. Be sure to read it over carefully so that you’re sure you’re comfortable with the interest rate, fees, etc. before clicking on “apply.” If you are, feel free to do so. In many cases, you’ll be directed to a new screen almost instantly that will tell you if you’ve been approved or denied.

Step 4: If you get denied, find out why

If you get approved for the credit card you were after, that’s great news. Activate it as soon as it arrives in the mail (after reading over the Card Member Agreement, of course), then you can begin using it responsibly right away.

But if you got denied, it’s important to pick up the phone and find out why. Under the Equal Credit Opportunity Act, lenders are required to explain why your application for credit wasn’t approved. If you couldn’t qualify for the card because of your credit, take steps to start improving it today. Otherwise, you should ask the customer service representative you speak to recommend a product you’re more likely to get approved for.

Step 5: After 6 months, consider applying for a credit card “companion”

Apply Now

on Chase's

secure website

If you’re happy with the credit card you selected, you might want to consider getting a card “companion” for it a few months down the line. Pairing up credit cards to maximize rewards is a smart strategy and will also help you keep your credit utilization low throughout the month by spreading your spending over multiple cards.

Nerd tip : For most folks, waiting about six months between credit card applications is a smart move. Applying for too many cards in too short a timeframe will cause your credit score to dip, because this is interpreted as a signal that you’re in financial trouble.

For example, if you took our advice and got the Chase Freedom® - $200 Bonus, getting the Chase Sapphire Preferred® Card as its companion is a good choice. With it, you’ll earn 2 points for every dollar you spend on travel and dining out, and 1 point per dollar spent on other purchases. Generally, points earned with the Chase Sapphire Preferred® Card are worth $.01 apiece, but if you redeem them for travel through Chase Ultimate Rewards, the value of each goes up by 25%.

You’ll also have the option to transfer your points to participating frequent traveler programs at a 1:1 ratio. If you’re skilled at hacking frequent flyer award charts, this card feature is a big selling point.

And this is also where pairing the Chase Freedom® - $200 Bonus and the Chase Sapphire Preferred® Card comes in. Since you’re earning Ultimate Reward points with the Chase Freedom® - $200 Bonus, you have the option to transfer them to your Chase Sapphire Preferred® Card account and redeem them for travel. You can then do another transfer to the frequent traveler program of your choice and make out like a bandit when you book your next trip.

If that trip happens to take you overseas, the Chase Sapphire Preferred® Card will definitely come in handy. It comes chip-enabled and charges no foreign transaction fees, so swiping abroad will be a breeze.

Finally, the Chase Sapphire Preferred® Card will get you started with a stellar signup bonus: Earn 40,000 bonus points after you spend $4,000 in the first 3 months. It carries an Introductory Annual Fee of $0 the first year, then $95.

With the Nerds’ tips above, you should be in good shape to apply for a credit card today!

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Applying for Multiple Credit Cards: 3 Things You Need to Know

Some people think that applying for credit cards is like applying for college—the more applications you send in, the better your chances of getting accepted. But that’s not the case. Creditors get nervous if they see you applying for credit cards en masse. To them, it looks like you have plans to run up a lot of debt, which puts you at a higher risk of defaulting on payments.

Before even thinking about applying for multiple credit cards, here’s what you need to know.

1. Each application counts as a hard inquiry.

When it comes to shopping for loans or mortgages, submitting multiple applications within a few weeks will only show up as one hard inquiry on your credit report. But credit card applications are a whole different story.

Each application counts as one hard inquiry on your credit report and costs you about five points on your credit score, whether you apply for a bunch of cards in the same day or over the course of a few months. With six hard inquiries on your credit report, you’re eight times more likely to default, according to FICO. Since hard inquiries stay on your credit report for two years, it’s best to apply sparingly.

2. With lots of cards, your average length of credit history will go down.

As you get new credit cards, the average length of your credit account history will go down. Your credit history length accounts for 15% of your credit score, so think twice before getting a bunch of cards at once. It could take a few years to bounce back.

3. It might create more problems than it solves.

So you got turned down for the credit card of your dreams. Applying for several cards afterward won’t fix the root of the problem—which is probably your less-than-stellar credit history. It will just make things worse.

If your application was denied, focus on making on-time payments, paying off debt and establishing a good credit history so that your next application will be accepted. If you have bad credit, consider applying for a secured card.

The takeaway: Applying for multiple cards is tempting. But hard inquiries stay on your credit report for two years and can make it harder to apply for other kinds of credit down the line. It’s better to take it slow, do your research and apply to one card at a time.

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5 Benefits of Good Credit

There’s no way around it: Having good credit is important. We hear as much from parents, colleagues and, sometimes, complete strangers. A stellar credit history shows potential lenders that you’re likely to repay loans in full and on time, which can help you lock in better rates on car loans, mortgages and other financial products. What’s more, it’s worth noting that the advantages of strong credit extend far beyond receiving good rates on loans. Here’s a closer look at the benefits of good credit.

Qualify for excellent credit card deals

A strong credit history will help you qualify for the best credit cards, which include low interest rates, rewards and cash back. As well as helping you save money while providing you with a wide range of perks, these factors will encourage you to keep using your credit card, which will boost your credit score if you continue to make payments when they’re due.

Improve chances of landing an apartment

Much like a potential lender, your landlord will want to determine your financial trustworthiness by taking a look at your credit score. This gives him or her better insight into how likely it is that you’re going to pay your rent on time every month. If that three-digit number is too low for your landlord’s liking, procuring your dream apartment may become difficult. Even if you’re able to get an apartment with a bad credit score, your landlord may increase the security deposit or request a co-signer on the lease.

Receive better car insurance rates

In order to predict potential losses on customers, some car insurance companies factor in credit scores when determining the price of monthly premiums. The better your credit score, the better your shot of receiving a reasonable deal. You may be turned down altogether if your credit score is too low.

Lock in utility services

Before taking you on as a customer, a utility company might look at your credit report to get a better sense of your payment history. If your credit history isn’t up to snuff, the utility company may require you to pay a deposit or ask for a so-called letter of guarantee in which a friend or family member agrees to pay your bill if you fail to.

Get a job

Though they have to get your permission beforehand, some employers will request to see your credit report as part of your job application. Red flags like past bankruptcies or frequent late payments may make them reluctant to extend you a job offer, as they may worry that these financial struggles will distract you from the demands of the job.

Because the effects of good credit can be felt in so many parts of your life, it’s important to do what you can to boost your credit score. Paying your credit card bills in full and on time is a great place to start, and will set you up for success as you apply for jobs, apartments and insurance coverage.

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Reduce Credit Card Debt with These 6 Tips

Having more than $15,000 in credit card debt is a lot, but it’s about average for U.S. households, according to NerdWallet analysis. Carrying this, or any amount of credit card debt, from month to month can be overwhelming and disastrous to your credit score. Paying off this debt is possible, but it takes focused determination and smart budgeting.

Before you start sending the credit card company a stack of money each month, sit down with all of your account information and total your credit card debt. That goes for all credit cards, including store cards and gas cards. Take a look at your balances, interest rates and minimum payments due.

1. Make a plan. If you have an end date in mind (the date by which you’d like to have all zero balances), use the NerdWallet payoff calculator to determine just how much you’ll have to pay each month. This tool is also great for illustrating just how fruitless it can be to pay only your minimum payment every month.


2. Consider a balance transfer. Credit card companies often offer balance transfer credit cards with 0% APR for an introductory period of up to 18 months. If you’re paying 19% interest on a high balance, cutting this interest could save you hundreds of dollars. NerdWallet’s most recent roundup of balance transfer cards will help you find the one that works best for you.


3. Stop spending. The more you add to your credit card balance, the more difficult it will be to reduce your credit card debt. So, stop spending. If you don’t have cash, don’t make the purchase.


4. Look for places to save. Find places to cut expenses and direct those savings to your debt. Maybe you can go without cable television for a few months, or perhaps you can reduce your restaurant budget to only one meal out per month. Cutting back on the things you enjoy can have double the benefits: reducing your spending and giving you incentive to pay off your debt.


5. Look for opportunities to earn. Maybe you can take on a part-time job for a few months or earn some cash on the side doing freelance projects. If you’ve made your household finances work without a part-time gig, all of the money earned here can go toward paying off your credit card debt.


6. Be flexible. You didn’t rack up your credit card debt overnight, and it may take much longer to pay it off. If you make a plan to put $400 on your balance every month, but have a tough month, don’t feel bad about cutting that payment to $350 (as long as you always make at least the minimum payment). Just pick it back up the following month (or earlier) with renewed dedication to getting debt-free.

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Will My Spouse’s Debt Hurt My Good Credit?

Handling finances within a marriage can either be a piece of cake or seem complicated and complex, especially if your spouse’s credit isn’t as healthy as yours. You may be asking yourself if your spouse’s debt will hurt your good credit.

If you’ve already tied the knot or are thinking of getting married, you should know a few things. Marriage itself does not affect your good credit or your individual credit report, according to credit reporting agencies like Experian. In fact, you will always have a separate credit report from your spouse. Even if you change your last name, your good credit will still exist, since credit scores and reports are based on your personal Social Security number.

Your spouse’s credit, in turn, will not instantly improve just because of your married relationship.

However, your good credit has the potential to become damaged when and if you and your spouse commingle your credit.

For example, if you become a joint cardholder on any one of your spouse’s existing credit cards, late payments and delinquency will reflect on your credit report. When you agree to become a joint cardholder, you become responsible for the existing and accrued debt on those cards. If you are simply an authorized user, you are not technically responsible for any of the debt, but late payments will reflect on your credit report.

The same is true if you and your spouse apply and take advantage of offers for credit cards for people with good credit. If you apply for a credit card with your spouse and are approved, reports for that credit card will appear on both your credit reports, negative or positive.

Your good credit can also be damaged if you and your spouse cosign on a loan for a car or even for a mortgage. Simply applying together will not have an affect on your credit, though your spouse’s poor credit could win you a higher interest rate or even a decline stamp. However, if you are approved, your good credit could take a hit if you or your spouse make a late payment on the loan for which you were both approved.

If you are set on combining your credit without giving up your ability to apply for credit cards for people with good credit, one option would be adding your spouse as an authorized user to your existing credit cards or new ones. Every time you pay on time, your spouse’s credit will improve.

Many financial advisors, however, recommend that to protect your credit, you keep your credit separate from your spouse’s at least until your spouse’s credit record improves. It is also recommended that you and your spouse sit down and review your credit reports and scores annually.

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Gas Cards and Bad Credit: How They Help, How They Can Hurt

If you have poor or no credit but still want a credit card that earns you solid rewards on gas spending, your options will likely be limited to a bad-credit credit card or a gas station card.

While these cards tend to offer fewer rewards, higher interest rates, and annual fees than traditional cards do, they may still be a wise choice, as they can help you rebuild your credit while earning some cash back on fuel purchases.

What is a gas rewards credit card?

A gas credit card rewards you for every purchase you make at the pump. For example, a company may offer a 2% cash-back bonus every time you swipe the card to pay for gas, so by spending $200 a month at the pump, your savings would equal $4. If you commute for work or travel a lot, a gas rewards card can make a whole lot of sense.

A gas credit card from an actual gas station is a little different. BP, Exxon and Shell all offer their own gas cards, but to get rewards, you are limited to using the cards at their stations. In addition, the interest rate charged on these cards tends to be higher than for regular credit cards, and you can often get the same rewards or better with more flexibility by using a regular gas credit card.

Choosing a gas credit card for bad credit

You have to be careful when looking at gas credit cards’ annual percentage rate (APR).

For example, say a card comes with unlimited 1% cash back gas rewards and no limit to the rewards you can earn, and you can qualify with limited or bad credit. However, the card also comes with a $99 annual fee and an APR between 17.9% and 23.9%, depending on your creditworthiness.

In this case, getting the card might only make sense if you expect to spend enough on gas to outweigh the annual fee. For this to happen, you’d have to spend a whopping $10,000 a year on gas ($100 in rewards at 1%). In addition, you really can’t carry a balance on the card, as the interest costs would outweigh any of the rewards you receive.

Another thing to keep in mind: Some gas stations charge more if you use a credit card instead of cash at the pump. Even if the difference is a mere five cents per gallon, the additional cost will likely still outweigh any rewards you receive from you gas credit card. So try to fill up at a station that offers gas for the same price, cash or credit, as long as it’s a reasonable price compared to other stations.

Why a bad-credit credit card can make sense

If you have poor credit or no credit history at all, it may still be worth signing up for a gas credit card for poor credit, even if the card comes with high interest costs and fees.

By signing up for such a card, using it and paying it off on time each month and maintaining a low balance on the card, you can improve your FICO credit score, since your payment history is sent to the major credit bureaus.

Credit cards also come with numerous fraud and security features that debit cards don’t offer, which makes them safer to use at the pump. For example, credit cards offer zero fraud liability for unauthorized transactions, which means you won’t be held responsible for any unauthorized or fraudulent transactions.

Finally, keep in mind that you only get charged interest on your card if you carry a balance. So the 20% APR you read about will actually be 0% if you pay off your balance in full each month.

Bad-credit credit cards hurt you if you carry a high balance, but you can avoid paying any interest and improve your FICO credit score by paying off the balance in full each month, while also earning some decent rewards for your gas spending.

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5 Sources of Credit Card Stress — and How to Get Past Them

We live in a hectic world, and the last thing most of us need is one more thing stressing us out. But the truth is that a lot of everyday items and situations could be sources of anxiety — including your trusty credit card.

Luckily, there are easy ways to deal with tension caused by your plastic. Take a look at five common sources of credit card stress below, and our tips for getting past them.

1. You charged more than you can afford to pay off in one month

Overspending with credit cards happens to everyone from time to time. If you got slammed with a bill you don’t have the funds to pay off in full, you have a few options for avoiding interest charges:

• Use savings to pay it off.


• Rework your budget to accommodate the bill.


• Transfer the balance to a 0% card.

But only do the transfer if it’s a really big balance that would take longer than six months to pay off — otherwise, the balance transfer fee you’d pay probably isn’t worth it.

In the future, be sure to track your spending carefully to avoid a larger-than-expected bill.

2. You missed your payment due date

Forgetting to pay a bill on time can be embarrassing, but the first thing you should do if this happens is call up your issuer. Apologize for missing the due date and make arrangements for the payment — if this is your first offense and you’re only a few days late, they might even be willing to waive the late fee.

If you’re more than 30 days past due, there’s the possibility your late payment has already been reported to the three major credit bureaus. If so, don’t panic — pay what you owe (including interest and fees), and make it a priority to pay on time in the future. The mark will stay on your credit report for up to seven years, but as long as you keep making responsible moves, its effect on your credit score will lessen over time.

In the future, set calendar reminders for your due dates, or sign up to get text or e-mail alerts from your issuer when a payment is due.

3. You got hit with an unexpected fee

The CARD Act of 2009 went far in helping reduce unfair or unexpected credit card fees. But they do still happen. If a fee you weren’t expecting shows up on your credit card statement, it’s best to get in touch with your issuer for an explanation. There’s always the possibility you were charged the fee in error, which is why looking over your credit card statement carefully every month is key.

Assuming the fee is no mistake, you should explain to your issuer that you didn’t anticipate the charge; they might be willing to reverse it this one time. Either way, be sure to ask for a clear explanation of how it can be avoided in the future, and call this one a lesson learned.

4. Your card was involved in a data breach

If you recently shopped at a store that was involved in a breach, take a deep breath and relax — it’s possible that your data didn’t make it into the hands of criminals at all.

The best thing you can do is monitor your credit card account and await further instructions from your issuer. They may decide not to take any action, but if they feel your account is at risk, they’ll notify you about canceling your card. In this case, simply follow their directions and wait for your new card to arrive.

On the other hand, if you spot a sketchy transaction on your account, be sure to get in touch with your issuer immediately. They’ll likely cancel your card, and, according to the terms of the Fair Credit Billing Act (FCBA), you won’t be responsible for the fraudulent charge since it happened while the card was in your possession. Phew!

5. You got hit with an unauthorized charge

Speaking of unauthorized charges, this is another stressor your credit card could cause. If a charge you didn’t make shows up on your online account or statement, again, it’s important to notify your issuer right away. They may take some time to investigate, but keep in mind that the FCBA limits your liability for unauthorized charges to $50.

What’s more, that liability drops to $0 if the fraud happens while the card is in your possession, or you report the theft of your card before any charges are made. Plus, most credit card issuers have $0 fraud liability policies, so the chances that you’ll have to pay anything are slim.

It might be a little bit of a hassle to untangle, but just keep reminding yourself that an unauthorized charge isn’t your fault and you likely won’t be out any money in the end. That should bring some needed peace of mind!

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NerdWallet’s Sexiest Credit Cards Alive 2014

Contrary to what you might think, Nerds know sexy when we see it. In fact, we’ve done some analysis and put together a list of the sexiest credit cards of 2014.

Like any good beauty contest, our choices are based on a combination of looks and personality – be sure to read about each card’s features below:

Sexiest card for dealing with debt: Chase Slate®

Apply Now

on Chase's

secure website

Making an effort to get rid of credit card debt is a smart and sexy move. If this is one of your goals, the Chase Slate® is here to help. With it, you’ll get 0% on purchases and balance transfers for 15 months, and then the ongoing APR of 12.99%, 17.99%, or 22.99% (V).This means that, if you move your balance onto the card, you’ll have over a year at 0% to pay it down. Talk about an attractive offer!

But what’s more, the Chase Slate® also waives its balance transfer fee for balances transferred within 60 days of opening your account. In addition to its sleek, vertical design, this feature really sets it apart from the crowd. And since it has an annual fee of $0, you can be sure you’re getting a hot deal.

Sexiest card for travel: Chase Sapphire Preferred® Card

Apply Now

on Chase's

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When it comes to design, the Chase Sapphire Preferred® Card is definitely a conversation piece. It’s made of metal, not plastic. This gives it an edgy, sexy feel that many consumers crave.

But again, it’s not all about looks – the Chase Sapphire Preferred® Card brings a lot of other great features to the table. You’ll earn 2 points per dollar spent on dining out and travel and 1 point per dollar spent on all other purchases. Generally, points earned with the Chase Sapphire Preferred® Card are worth $.01 apiece. But if you redeem them for travel through Chase Ultimate Rewards, the value of each goes up by 25%.

Also remember that you have the option to transfer your points to participating frequent traveler programs at a 1:1 ratio. This perk could really spice up your options when it comes time to book your trip.

If you’re planning an overseas getaway, the Chase Sapphire Preferred® Card is a great choice to take along. It comes chip-enabled and charges no foreign transaction fees.

To get started, the Chase Sapphire Preferred® Card provides a signup bonus: Earn 40,000 bonus points after you spend $4,000 in the first 3 months. It charges an Introductory Annual Fee of $0 the first year, then $95. They say that sexy can’t be bought, we think the annual fee is a reasonable price to pay for a card this exciting.

Sexiest card for earning cash back: Citi® Double Cash Card

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on Citibank's

secure website

OK, we admit: This card leaves a little to be desired in the looks department. But when you hear about the rewards structure provided by the Citi® Double Cash Card , we think your heart will skip a beat.

With it, you’ll earn 1% cash back on your purchases, then an additional 1% cash back when you pay them off. That’s a sky-high rewards rate, and there’s no limit to the cash back you can earn. Plus, it charges an annual fee of $0*, so it’s an inexpensive card to keep on hand. (We were tempted to call it cheap, but it’s just too classy for that kind of language.)

Sexiest co-branded card: Citi® / AAdvantage® Platinum Select® MasterCard®

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on Citibank's

secure website

Deciding on a sexiest co-branded card was tough, but ultimately we’re pretty enamored with the Citi® / AAdvantage® Platinum Select® MasterCard®. Appearance-wise, the card is cheerful – the little airplane on the front is just too cute. We also think the gray background on the card art was a good choice because it’s cool and low-key.

In terms of card features, the Citi® / AAdvantage® Platinum Select® MasterCard®’s are enticing. They include:

• A signup bonus: Earn 50,000 American Airlines AAdvantage® bonus miles and 2 Admirals Club® Passes after making $3,000 in purchases within the first 3 months of account opening*.


• A free checked bag for you and up to 4 travel companions on every American Airlines flight.


• 2 AAdvantage miles for every eligible dollar spent with American Airlines and 1 AAdvantage mile for every dollar spent on other purchases.


• Group 1 boarding on American Airlines flights.


• Get a $100 American Airlines flight discount every year that you spend at least $30,000 on the card.


• Get 10% of your redeemed miles back, up to 10,000 miles per year.


• $95, waived for first 12 months*.

This card is an exciting choice for folks who fly American Airlines frequently – and what’s sexier than racking up enough miles for a little weekend getaway?

Sexiest card for big spenders: Citi Prestige® Card

Apply Now

on Citibank's

secure website

Without question, the Citi Prestige® Card is one of the hottest cards on the market today. Physically, it’s very impressive – a little black dress has nothing on this baby. Plus, we love the bold, teal emblem on the front. It’s just enough to make the card stand out, without being too flashy. Coco Chanel herself couldn’t have done better.

But the card’s features are equally stunning. With it, you’ll earn 3 ThankYou points for every dollar spent on airfare and hotels, 2 ThankYou points for every dollar spent on dining and travel, and 1 ThankYou point for every dollar spent elsewhere. You can use your ThankYou points for everything from merchandise to travel, and remember that this is one of the few Citi cards that allows you to transfer your points to participating frequent traveler programs.

The rewards earning and redemption structure provides a lot of opportunities for cashing in big on spending you’re already doing, but this card’s cachet mostly comes from its fringe benefits. These include:

• Access to a private jet, airport lounges, chauffeured car service, and more.


• 24/7 concierge service to help take care of your shopping, travel, entertainment, and dining needs.


• Access to exclusive events through Citi Private Pass Beyond.

The Citi Prestige® Card also carries a signup bonus: 30,000 ThankYou points when you spend $2,000 within the first 3 months of opening your account. In this case, sexy doesn’t come free – the card’s annual fee is $450. But if it’s a luxe lifestyle you’re craving, you might want to consider coughing up the cash. Remember, it’s partially offset by the card’s annual $250 air travel credit.

So there you have it, folks – the sexiest credit cards of 2014. Now go take a cold shower and consider applying for one of them today!

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Do All Balance Transfer Credit Cards Have a 0% APR?

No interest credit cards are a godsend if you’re trying to get out from under credit card debt. They allow you to pay down your balances more aggressively because you have a temporary reprieve from paying interest.

But not all balance transfer credit cards have zero interest. If you think you won’t be able to pay off the balance during the limited-time 0% APR period, it might be better to choose a card with a low ongoing interest rate. Even though you won’t have that no interest interval, you might save more money in the long run.

Keep in mind that there are many good reasons not to open a new card at all. Applying for a credit card results in a hit to your credit score of about five points, and if you’ve already nearly maxed out your existing cards or have a very low score, you may not be able to get approved for a card with good terms. In such cases, moving balances to your existing card with the lowest interest rate might be your best move.

But let’s assume you’re opening a new zero interest credit card and transferring balances from your existing cards. Here’s what to look for:

Transfer fees

It’s usually not free to transfer balances. Although there are a few cards out there without transfer fees, most no interest credit cards charge a percentage of the balance every time you move money onto the card. Look for a card with a low fee of 1 or 2%.

Short-term relief from interest

Zero interest sounds great, but how long will it last? Many 0 APR credit card offers sound great, but the interest holiday expires after only a few months. Look for an offer with an interest free period on the longer side, usually 15 to 18 months.

Super high rates once the low rate expires

The last thing you want is to end up with sky-high rates and be unable to apply for a new balance transfer card when the time comes. Look for a card that has rates below 20% after the no interest period expires. Be aware that most cards have variable rates and the actual rate may be higher when the time comes.

Low annual fees

Credit card companies are businesses too, and if they aren’t charging you interest, they’re looking for other ways to make money. Balance transfer cards with no annual fees do exist, but you may end up paying something. Anything above $100 a year is probably too exorbitant, and you should look elsewhere.

The bottom line is that balance transfer credit cards are a tool to help you get out of debt. They shouldn’t be used to prolong overspending habits. Eventually interest rates are going to kick in, and you’re going to want your balances to be as low as possible when that happens.

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4 Ways for People with No Credit to Start Building a Credit History

An estimated 80 million Americans have little or no credit history, according to Experian, one of three major credit reporting bureaus in the country. For those consumers, receiving a car loan or a mortgage – and even applying for an apartment – can be extremely difficult. Fortunately, there are several effective ways to start building your credit history from scratch. Here’s a look at some of your options.

1. Become an authorized user

Your parents raised you, fed you, and put clothes on your back. Now that you’re older, they can also help you establish your credit history by adding you as an authorized user on one of their credit cards. As an authorized user, you’ll have access to your parent’s full line of credit and perhaps more importantly, your credit score will improve every time a payment is made in full and on time.

2. Get a secured credit card

Secured credit cards serve as an excellent introduction to the world of borrowing. Here’s how it works: You make a deposit to a bank or credit union, which uses this money as collateral in case you miss a payment. The amount of your deposit also serves as your credit limit. Because the financial institution isn’t risking very much in these types of transactions, they are more willing to work with customers without credit histories. Upon closing your account, your deposit will be returned to you.

3. Apply for an unsecured card, but not too often

Obtaining an unsecured credit card doesn’t require you to make a deposit. These types of credit cards also tend to have higher spending limits, which is helpful when you need to make larger purchases. That said, it’s important to be strategic about applying for an unsecured card, as doing so will automatically trigger an inquiry on your credit report, which usually subtracts several points from your credit score.

4. Use your new credit card carefully

Once you’ve obtained a new card, be sure to use it responsibly. After years of using cash or a debit card – which isn’t a loan and thus doesn’t help your credit score – getting into the rhythm of doing so may take some time. Also, be aware that exceeding 30% of your total credit limit could lower your credit score, so try to keep your expenses under that threshold.

From helping you land your dream apartment to locking in the best possible rate on a car loan, a healthy credit score can go a long way. But before you get there, you’ll need to establish a credit history to prove that you’re a reliable borrower. Using these tips can set you in the right direction.

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Bad Credit Credit Card Fees: What to Watch Out For

Maybe you had a long period of unemployment. Maybe you had a medical disaster that resulted in a lot of unpaid bills. And maybe it was just plain overspending.

Whatever the reason, you’ve joined the millions of Americans who have credit scores below 630—which means you have bad credit.

Luckily, it’s still possible to get a credit card from a bank that specializes in offering credit cards for people with bad credit.

Choose a card that will rebuild your credit

Steer clear of prepaid debit cards if your goal is to build your credit history. While those are useful financial tools, they don’t actually improve your score.

Secured cards require a deposit

If you have no credit or very low credit, your best bet may be a secured credit card. That means you pay a refundable deposit, which helps the card issuer feel better about taking a chance on you. Of course, you’re looking for a deposit that’s as low as possible. Depending on how bad your credit is, you may be looking at a deposit between $50 and $200.

Look for low annual fees

Annual fees are also a factor. Many credit cards for poor credit charge an annual fee. Some annual fees can go as high as $500—but please don’t be taken in by these credit card offers. Even with a low credit score, you should be able to find a card with a fee below $100.

Good balance transfer cards

If you’re hoping to transfer a balance from one of your existing cards, look for a credit card deal that has a low transfer fee. Most balance transfer credit cards charge a fee based on a percentage of the amount you’re transferring, anywhere between 1% and 5% of the total. If you have tens of thousands of dollars of debt, a 5% balance transfer fee can be quite a chunk of change. Fees below 3% are realistic, although you may find that it’s hard to get a zero interest transfer deal if your credit score is very low.

Don’t focus on rewards cards

There are some rewards credit cards out there for people with poor credit, but they are more likely to come with higher fees. If you can find a decent deal that gives you travel rewards, points, or cash back, go for it. But right now your priority is rebuilding your score—not getting a few airline miles.

Once your score is back in the fair-to-good zone, you can reward yourself by finding a card with extra perks. But for now, focus on finding one with low fees. Pay your bills on time, keep reducing your debt so your balance is a smaller percentage of your overall available credit, and your score will be well on the way to recovery.

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Can I Get a Bad Credit Credit Card if I Have No Credit?

When it comes to applying for a credit card, having no credit is almost as challenging as having bad credit. Fortunately some of the best credit cards for people with bad credit are also good options for first-time applicants or people with no credit history at all.

Cards for those with bad credit aren’t necessarily a bad deal. It may be hard to find a rewards card, and if you do find one, it probably comes with an annual fee. You’re also unlikely to find a card with rock-bottom interest rates. As an example, the best credit cards for people with no credit history have an interest rate of around 15% — which won’t matter to you unless you carry a balance.

If you can, try to get an unsecured credit card. That means you don’t have to put down a deposit. Secured credit cards that require a refundable deposit (often between $50 and $200) are easier for first-time credit card applicants to qualify for because the deposit gives the card issuer some guarantee that you’ll pay back what you borrow.

Whether you end up with a secured or unsecured card, this is an opportunity to show that you can handle credit, which raises your score and opens the door to better options down the line. The most important thing you can do to raise your score is pay your bill on time, every time. It’s also helpful to use only a small percentage of your total available credit, which can be difficult if you have a very low credit limit when you’re first starting out.

A good rule of thumb: Purchases in any given month should add up to no more than 30% of your credit limit. For example, if you have a $300 credit limit, you can charge up to $100 in each billing cycle without damaging your credit score. If you need to charge more than that, you can pay the balance off early so you always have less than $100 owed on the card.

Over time, on-time payments and carefully controlling the size of your balance in relation to your credit limit will help you establish a strong credit history. You’re only a first-time credit card applicant once. Next time, you’ll be an old hand at this.

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Will a Bad Credit Credit Card Save Me Money?

If you have poor credit and are seeking to improve it, you may benefit from getting a bad credit credit card. They’re easy to qualify for even if you’ve made some mistakes in the past, and with consistent, responsible usage, you can gradually boost your credit score. Despite these perks, however, this type of card isn’t going to save you money.

Why credit cards for poor credit won’t save you money

If you’re looking to save some dough, you won’t have any luck with a credit card for bad credit. Because people who qualify for these cards don’t have good credit, they are considered riskier and are given a higher interest rate. Your interest rate may be 20% or even higher, so if you ever carry a balance on your card — meaning you don’t pay your balance in full each month — you will end up spending a lot of money on interest.

Accordingly, this type of credit card can actually cost you more money than lower-interest credit cards if you ever carry a large balance. The best way to avoid this unnecessary expense is to never charge more on your credit card than you can reasonably pay off in the next month or two. If you don’t carry a balance, you won’t spend money on interest payments, but you also won’t necessarily save money. You’ll just have a brief, free loan as you would with any credit card.

What a credit card for bad credit can do for you

While this type of credit card can’t save you money, it can help you build or improve your credit if it’s lacking. Why should you care? A bad credit score can make it difficult to qualify for loans, get favorable rates on insurance or even get a lease approved for an apartment.

The best way to boost that score is to show you can use a credit card responsibly. Qualifying for a credit card for poor credit and making smart moves such as keeping your credit card balance low and paying every bill on time will help increase your credit score. Before you know it, you’ll be able to qualify for a card with a better interest rate and possibly even bells and whistles like a rewards program.

An extra perk: Unlike debit cards, credit cards offer zero liability on unauthorized purchases made if your card is lost or stolen. This extra level of protection you get with credit cards is especially valuable with an increasing number of data breaches.

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4 Benefits of Getting a Bad Credit Credit Card

It can be easy to get in trouble with credit cards, but they can be helpful financial tools when used appropriately. Credit cards for bad credit are especially beneficial if you’re trying to improve your credit score. Here are four ways a credit card can help your finances.

Build good credit

If you have poor credit, either because of limited credit history or some mistakes from the past, responsible use of a bad credit credit card is your ticket to improved credit. When you use a credit card, your usage is reported to the major credit bureaus. Responsible behaviors such as making your minimum payments, paying your bills on time and keeping a low balance will gradually raise your credit score.

Enjoy the benefits of improved credit

There’s a reason behind doing all this hard work: Using your credit card for bad credit wisely and building a better credit score will pay off in many ways. When you fill out a lease to rent an apartment or home, your credit is checked to make sure you have a strong repayment history. Your credit is also checked any time you apply for a loan, such as an auto loan or mortgage.

Good credit not only improves your chances of being approved, but also means you will get a better rate. It can also mean lower rates on insurance and future credit cards. Additionally, many employers run credit checks on job candidates, so having a solid credit report might even influence whether you are offered a job.

More-secure transactions

All credit cards feature the benefit of zero liability for the cardholder on unauthorized purchases. This means if your credit card is lost or stolen, you are not responsible for any of the fraudulent purchases. Debit cards do not have the same legal protections and may result in loss of money if stolen. This credit card benefit is especially valuable as credit card data breaches become more common.

Helpful for emergencies

Credit cards for people with bad credit should never be looked at as free money or a way to live beyond your means. It’s important to keep in mind that each time you swipe, you are borrowing money and must pay interest if you carry a balance. However, credit cards are very useful for occasional emergencies.

Say you get a flat tire and it’s the very end of the month, and you need a new tire but don’t have a spare $80. You can put it on your credit card and pay it off as soon as you get your paycheck. A credit card serves as a handy way to front-load expenses that you know you can pay off in the very near future. Just don’t get in the habit of doing this regularly, as you could get stuck in debt.

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Credit Score vs. Credit Report: What’s the Difference?

When you apply for a credit card, apartment rental, mortgage or car loan, two metrics help prove your ability to pay off debt: your credit score and credit report. Although they measure similar things, understanding the differences can be confusing, especially if it’s your first time applying for a credit card.

It boils down to this: Your credit score, a simple number, is determined by the detailed information in your credit report. But let’s break it down further:

Credit Score

Your credit score is a single number lenders use to evaluate your credit worthiness. There are many different types of credit scores out there, but the most common is a FICO score, determined by the Fair Isaac Corporation using five factors:

• Payment history (35%): How often you miss payments and how late those payments are.


• Amounts owed (30%): The balance on all your credit accounts compared with your credit limit.


• Length of credit history (15%): The amount of time you’ve had credit accounts open. (This makes it difficult for people with little or no credit to have a high score.)


• New credit (10%): The number of new credit cards you’ve applied for recently. In general, a lot of new credit at once hurts your overall score, especially if you have a short credit history.


• Types of credit used (10%): The diversity of credit you have, between credit cards, loans and other accounts.

For better or worse, your score can fluctuate over time depending on your account activity. FICO scores range from 300 to 850. Scores above 720 are considered “excellent,” and scores above 690 are deemed “good.” If you have little or no credit history, you’ll have a lower score.

When you apply for a credit card or loan, the issuing bank will access your credit score to determine your eligibility. To check your own FICO score, purchase it on myfico.com.

Credit Report

Your credit report is an exhaustive list of your lines of credit and payment history, but it doesn’t contain your credit score. Three major agencies — Equifax, Experian and TransUnion — compile credit reports. Several pages long, they detail all the accounts you’ve ever opened or closed, loans you’ve taken out, and how diligently you paid off outstanding balances. Finally, if you’ve ever been sued or filed for bankruptcy, that will appear on your credit report too.

Like with a credit score, if you don’t have credit, your report will be sparse at best. It’s important to establish credit because lenders, landlords, insurers and employers use credit reports to holistically evaluate your borrowing history and determine applicants’ eligibility for loans, credit cards, rentals, insurance policies and jobs.

Everyone’s legally entitled to one free credit report per year from each of the three major agencies. You can order these reports from http://1.usa.gov/1nbIDEH. They sometimes contain errors, so it’s important to examine them carefully and dispute any mistakes you find with the credit bureau that issued the report.

Good credit scores and credit reports are key to accessing financial products. If you spend responsibly, pay off balances and are careful about opening new accounts, you’ll be well on your way to having healthy credit and the documentation to back it up.

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Bad Credit Credit Card Balance: 3 Reasons to Pay It Off Now

If you rack up more purchases with your bad credit credit card than you can pay off by the end of the month, you’ll find yourself carrying a balance. Or you may have heard misguided financial advice that carrying a balance is good for your credit score, so you deliberately don’t pay your balance in full.

We’re sorry to be the bearers of bad news, but carrying a balance on credit cards for people with bad credit just isn’t a smart idea. Here are three reasons why you should aim to pay your balance in full instead of carrying a balance.

1. You’ll pay high interest rates

Credit cards for poor credit have some of the highest interest rates out there, often over 20%. When you carry a balance instead of paying it off in full each month, you have to pay interest on that borrowed money. Not only is this high interest fee a waste of money, but you can’t make as much progress on debt because a large portion of your payments go toward interest instead of the actual amount you owe. This alone is enough to get some people stuck in a cycle of debt for longer than anticipated.

2. It won’t improve your credit

You may have been told that carrying a balance improves your credit score, but this is a bad myth that just won’t die. Carrying a balance on a bad credit credit card, or on any credit card for that matter, won’t do anything for your credit. Instead, try other proven tactics for improving your credit score, such as carrying a low balance and paying your bills on time. These strategies also don’t require you to spend any money on interest payments.

3. It can actually hurt your credit score

Many factors go into determining your credit score, but one of the big ones is your credit utilization ratio. A massive 30% of your credit score is determined by how much of your available credit you are using at any given time. Using credit isn’t necessarily bad, but carrying a large balance can hurt you. According to myFICO, “When a high percentage of a person’s available credit is been used, this can indicate that a person is overextended, and is more likely to make late or missed payments.” Aim to use no more than 30% of your credit limit on each of your credit cards for optimal credit health.

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Should I Use a 0% Balance Transfer Credit Card for Student Debt?

If you’re mired in student debt — like 40 million Americans, according to CNN — receiving a balance transfer credit card offer in the mail may seem like a good omen. After all, if you can pay off even part of your loan at 0%, you’ll avoid the 4.66% rate on new undergraduate Stafford loans and the often-higher rates charged by private lenders.

But those savings aren’t assured until you’ve successfully paid off your balance. Many things can go wrong between the day you sign up for a balance transfer and the day you become debt free. Here are a few reasons to be cautious:

You may be ineligible for a balance transfer credit card

Before you can move your student debt to a zero balance transfer credit card, you need to qualify for the card. This may be difficult if you have a short credit history or have missed payments in the past. And even if you do qualify, not all lenders accept credit card payments. For example, you can pay federal loans with a credit card only if you’re in default. Private lenders’ policies vary.

You may not save as much as you think

It’s possible to find a free balance transfer, and some credit card companies are open to negotiation. However, you should expect to pay a few percentage points when you move your debt. This alone won’t erase your savings, but you should factor it into your budget.

You may miss the flexibility of student loans

Making a late payment on a credit card — or missing a month — is much worse than falling behind on student loans. For one, it could cause your interest rate to increase, leaving you with a higher payment than you had before your balance transfer. Student loan borrowers are also eligible for income-based repayment, tax incentives or loan forgiveness in some circumstances. Credit card users have none of these perks.

You may be committing fraud

Unlike student debt, credit card debt is dischargeable in bankruptcy. This may sound like a good reason to take a balance transfer credit card offer, but it’s not. Transferring your student debt to a card with the intent to file bankruptcy is fraud. And even if you perform a balance transfer with good intentions, but declare bankruptcy later, your lender might object.

The bottom line

That said, many people have used 0% APR balance transfer credit cards to pay off student debt. If you’re determined to take this path, make sure you’ve budgeted carefully, so that you’ll have paid off your balance in full — including any additional fees — by the time the introductory offer expires. And then stick to your budget! Consider automatic payments and be certain you can cover them on the date due. Overdraft fees will only eat into your savings — and make this risky proposition even worse.

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Length of Credit History: What Does It Mean?

Let’s face it: When it comes to credit scoring, you can’t assume anything. For example, if you think you know what “length of credit history” means and how this factor affects your FICO score, you might very well be wrong.

But never fear, the Nerds will tell you everything you need to know about this important credit score category. Let’s dig in.

How length of credit history fits into your FICO score

First, let’s review how length of credit history fits into your overall FICO credit score. The FICO score is the one most commonly used by lenders in the United States, so knowing its ins and outs is key.

The FICO model looks at a consumer’s credit profile and determines his or her score based on following factors:

• Payment history (35% of the score)


• Amounts owed (30% of the score)


• Length of credit history (15% of the score)


• Mix of accounts (10% of the score)


• New credit inquires/applications (10%)

After payment history and amounts owed, length of credit history is the most influential aspect of your FICO score. As a result, it’s essential to do a deep dive into this category to figure out what it exactly means.

How length of credit history is calculated

If you think “length of credit history” is one simple figure, i.e., the years or months since you started using credit, this is a good starting point – it’s just not the complete picture.

To get some answers, the Nerds reached out to Anthony Sprauve, senior consumer credit specialist at FICO. In an email statement, he pointed us to the information that’s found on the company’s website. It states that length of credit history refers to the following data points, which are crunched into your overall FICO score:

• The age of a consumer’s oldest credit account.


• The age of a consumer’s newest credit account.


• The average age of all of the consumer’s credit accounts.


• How long different types of credit accounts (mortgages, credit cards, auto loans, etc.) have been established.


• How long it’s been since different types of credit accounts have been used.

To get a better sense of which of these is most influential, the Nerds followed up with Sprauve. In an email he told us that:

“Age of oldest account and average age of all accounts [count the most]. The longer credit history a person has, the better for them.”

We also asked why it matters how long it’s been since a person used one of their credit accounts – as long as it’s still showing up on a consumer’s credit report, doesn’t it have the same bearing on the FICO score? Actually, no. Sprauve explained:

“Active accounts have a larger bearing on a consumer’s FICO Score because they show the most recent activity. Recent activity has more impact on the FICO Score than older activity.”

Tips for scoring high in this FICO category

Now that it’s clear how length of credit history is determined, you’re probably wondering what you can do to score high in this category. Here are the Nerds’ top tips:

• Start using credit responsibly as soon as you can. For most folks, the easiest way to do this is by getting a credit card in early adulthood.


• Be cautious when opening new accounts. Every time you get new credit, you’ll be lowering your average age of accounts. Only apply for loans or cards you actually need.


• Think twice before closing an old credit card . Although a closed account with positive information will stay on your credit reports for up to 10 years, its effect on your score will diminish over time.


• In that same vein, keep old accounts active if you can. For most people, the easiest way to do this is by linking an old credit card to a monthly subscription service, like Netflix or a gym membership. According to Sprauve: “It’s prudent to continue to use older accounts so they don’t go dormant and run of the risk being closed …”

The takeaway : The length of credit history portion of your FICO score is a little complex than meets the eye. But by using credit responsibly from an early age, minimizing new credit applications, and keeping old credit accounts active, everyone can score high in this category.

Confused image via Shutterstock

The post Length of Credit History: What Does It Mean? appeared first on NerdWallet Credit Card Blog.

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