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Will a Store Credit Card Help Improve My Fair Credit?

Jan. 4, 2015
Credit Cards, Personal Finance
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If you don’t have a long credit history and want to build your fair credit, a store credit card can help.   However, using store credit cards to influence your credit score isn’t a simple solution. There are several factors that you need to consider before you apply for store credit cards for people with fair credit.

How store credit cards can improve fair credit

Store credit cards can be a good place to start building your fair credit into something better. You probably want a card for a store where you often shop, and you’ll likely use the card frequently enough to have a balance every month. The key is to pay off this balance in full every month by the statement’s due date. This will likely increase your fair credit score because you’re positively impacting your payment history and other factors that make up your credit score.

How store credit cards may hurt your fair credit

You’ve worked hard to get your credit score in the fair range, and a store credit card may not be your best option to keep it there — or push it to good or excellent. You need to decide if you have the self-control to avoid spending too much on your store credit card. If you don’t, you run the risk of racking up credit card debt, which will damage your fair credit. This debt will be compounded by the interest rates upwards of 25% that come generally come with store credit cards. Plus, if your goal is to improve your fair credit by using a card, then a rewards credit card may be a better fit for you. With interest rates that usually fall between 12.9% and 17.9%, rewards credit cards could be a better option.

In addition, store credit cards frequently have low credit limits, sometimes as low as a few hundred dollars. This factor is important for store credit cards because it will be part of your credit utilization ratio, the amount of credit you use compared with the amount of credit you have available. If you are close to reaching that credit availability maximum, it can negatively impact your fair credit. Ideally, you’d use 30% or less of your total credit available.

Your next steps 

After you consider the advantages and disadvantages of store credit cards on your fair credit, decide whether a store credit card is right for you and your financial habits. If you choose not to get one, there are other ways you can improve your credit from fair to good. Get started as soon as possible because even the simple steps you can take will need a few months to show up on your credit score.