Scoring the Right Credit Card for You: New Tool Makes It Easier
Credit card companies know where you shop, how much you spend on average and your credit history. But what do you really know about them? CreditKarma.com's new Credit Card Statistics tool, which launched Wednesday, is the latest online widget to pull back the curtain on those lenders, showcasing statistics like customers' average credit limit, credit score and age. It also contains user-generated reviews of real-life credit card experiences and lets you share your own rants or raves.
For consumers, the tool could lead to better decision-making about where to apply for credit, which will help reduce the odds of a credit-dinging turn-down. "We want to help consumers set expectations around credit limits," said CreditKarma.com CEO Ken Lin.
The tool allows users to sort cards based on various criteria, including average approved credit score, average credit limit awarded, average household income, average cardholder age and the average user rating. Using the filters, it becomes easy to see what card best fits a borrower's profile.
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For example, an early 20-something might find a good match with the Citi (C) Forward Card for College Students -- more than 60% of its holders are in the 18- to 24-year-old age bracket, with average credit scores in the mid-600s. For people who need to rebuild damaged credit, the CapitalOne (COF) Secured Mastercard caters to that demographic -- more than half the people who hold it have credit scores below 600, and it offers low credit limits of up to $300. Big spenders and high earners might feel more at home with American Express (AXP), where the average credit score across its cards is above 700 and the average balance is more than $9,000.
"The No. 1 thing to look at is average credit score and approval," says Lin. "The biggest mistake is that people look for one that looks good on paper with big rewards or [a] high limit, but then you apply and get declined." That starts a cycle of applications and declines which can hurt your overall credit score, warns Lin. He advises finding a card where other holders have a similar credit score to yours. For example, if your credit score is 650, don't shoot for a card like American Express, where the majority of customers have over a 700.
Another trap for credit card holders is failing to re-evaluate their cards when their needs change, and ignoring the latest offers. "Credit card companies rely on consumers' laziness," says Lin. People get comfortable paying a certain amount, he says, and the hassle of applying for a new card can cause them to miss out on saving up to thousands of dollars. Other sites like BankRate.com and CreditCards.com also offer credit card comparisons.
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