But finding the right credit card for you—let alone getting approved for one—can be nerve-wracking. You may not know where to start, what information credit card companies (called issuers) need from you, or how to increase your chances of getting credit card approval. That’s why it’s important to learn as much as possible about the application process and what to expect from it before applying for a credit card.
Read on to learn more about how to apply for a credit card and how to increase your chances of being approved.
1. Know your credit score and what it means
Credit scores help issuers determine your creditworthiness, or your likelihood of repaying your loan. That’s why poor credit can lead to your application being rejected – and that’s why it’s important to know your credit history before you apply.
You can request a free copy of your credit score and report it every 12 months from any of the three major credit reporting agencies: Equifax, Experian, and TransUnion.
Alternatively, you can access your credit score for free through many financial institutions. First, check to see if your bank or card issuer offers this offer by checking your bank or card issuer’s website, calling customer service, or searching your account. If not, you can use a service like Capital One’s CreditWise, Chase’s Credit Journey, or American Express’s MyCredit Journey to check your score – you don’t need to be a banker to use it.
You can also check your credit report if you want to dig deeper. Credit scores and credit reports can be easily confused. Think of your credit score as the “grade” you earned at school. Your credit report is more like a file with individual assignments and tests – a record of all your activities taking the course. If your score doesn’t look right, check your credit report and be sure to dispute any errors you find.
The two main credit scoring systems are FICO and VantageScore. Here’s a breakdown of each score area:
- Excellent: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 300 to 579
- Excellent: 781 to 850
- Good: 661 to 780
- Fair: 601 to 660
- Poor: 500 to 600
- Very poor: 300 to 499
It’s worth noting that most credit cards have credit requirements that applicants must meet in order to be approved. For example, if you have bad credit, you don’t want to apply for a card that requires good credit.
What to do if you don’t have a credit score
If you’re just starting out with a credit card and don’t have scores yet, that doesn’t mean you can’t get a credit card. You should look for credit cards that do not require a credit history, such as B. secured credit cards. These cards help you build your credit score so you can apply for a better card in the future.
For example, if your credit score ranges from good to excellent, you have other credit card options to choose from, such as miles for everyday shopping. With the right rewards card, you can save hundreds of dollars a year or get significant discounts on hotels and flights.
2. Think about your needs
Once you know which cards you might qualify for based on your credit history, it’s time to start thinking about what your credit card requirements are. Looking to earn cash back or travel rewards? Or maybe your priority is to build credit first. There are many cards that meet all of these needs and more.
What to look for when choosing a credit card
Each card also comes with terms and conditions, including fees, benefits, benefits and interest rates. Here are some aspects to consider:
Do you mind paying an annual fee? Check to see if the card you’re interested in has an annual fee and consider whether the annual fee is worth it for you. For example, the annual fee for many rewards cards typically ranges from $95 to $550 per year. Can you get enough rewards on the card to offset the fees?
Will you wear a balance? Consider whether you have a credit card on your card or pay for your purchase in full. If you plan to have a balance, the interest rate on your card will have a major impact on your monthly payments. You should look for cards with low interest rates or cards that are available for a limited time, such as B. 12 to 21 months, offering an introductory APR of 0%.
Do you want to be rewarded? If you have good credit, a rewards card that lets you earn cash back, points, or miles on eligible purchases may be a good option. You can earn rewards for everyday purchases at grocery stores, gas stations, restaurants, and more, as well as a flat reward for all other purchases. Many of these cards also offer sign-up bonuses for new cardholders, as well as other perks such as travel perks, shopping credits, and purchase protection.
3. Understand the credit card conditions
You’ll see many different credit card terms on your credit card application, and it’s a good idea to understand these terms before you apply. Here are some terms you will see and their meanings:
Some card issuers charge an annual fee for using a credit card. Some credit cards that typically charge an annual fee are those with extravagant perks, such as rewards cards and travel cards. Annual fees typically start at $95, but sometimes card issuers waive the first year fee for new cardholders.
Annual Interest Rate, or APR, is the interest that is applied to your credit account during a billing cycle. You usually pay this interest when you have a balance or are late in paying your bills. APRs are usually variable; they cover a range (eg 15.99% to 22.99%) and are determined by the prime rate.
The types of APRs you might see are:
Introduction to Balance Transfer APR. Some cards offer new cardholders an introductory APR of 0% on balance transfers for a specific period (e.g. 12 months).
Purchase an introductory APR. This interest applies to all purchases. Similar to the introductory APR for funds transfers, some credit cards offer a 0% introductory APR on purchases for a specific period of time, such as B. 12 months.
Fine APR. Missed or refunded payments will be subject to higher interest rates.
A balance transfer is when you transfer a debt from one account to another. If you want to pay off your debt, you can transfer your debt to a card with a lower interest rate, or better yet, a credit card with 0% APR.
A cash advance is a loan you can draw against your credit card limit. While it’s similar to using a debit card to withdraw cash from an ATM, cash advances from a credit card come with high APR and transaction fees.
You may be penalized if you pay your bill late, your payment is refunded, or if you exceed the maximum limit of your credit card.
Reward rates are in the form of cash back, points or miles. The credit card indicates the type of rewards offered and how you will be rewarded for your purchases.
Foreign transaction fees
If you choose to use your credit card outside the United States, you may be charged a fee for each transaction. Foreign transaction fees are usually around 3%. However, if you travel abroad frequently, you may want to consider a credit card that does not charge foreign transaction fees.
New cardholders often receive a welcome bonus when they sign up for a new card. Typically, welcome offers allow you to earn cash back, points or miles by spending a certain amount on a new card over a period of time. Welcome bonuses can also be called welcome offers, introductory bonuses, or sign-up bonuses.
4. Check the pre-approval
Before applying for a card, check to see if you can be pre-approved. However, please note that pre-approval does not guarantee that you will receive the card you applied for.
Bankrate’s CardMatch tool is a free resource that matches you with personalized offers through the prequalification process. This is a great tool to use before applying for a new credit card because it’s a soft credit request, not a hard credit request. Soft credit requests will not affect your credit score, while hard credit requests will lower your credit score and will be reported to the three credit bureaus.
Also, it’s important to note that any time you check or report your credit score, it’s considered a soft credit request, meaning it doesn’t harm your credit score in any way.
5. Be prepared to apply for credit impact
In most cases, applying for a credit card triggers a strict check on your credit report, which means the card issuer will collect your credit report to check your creditworthiness. A tough request can lower your credit score, but the effect is short-lived. The maximum duration of a hard request in the report is two years.
If you apply for a credit card and your application is declined, be aware of this when you apply for your next credit card. In the long run, it’s a fairly neutral event to have a tough call on your report. However, applying for multiple credit cards in a short period of time — with the tough requirements — is a red flag for card issuers.
6. Determine your repayment strategy
Credit cards come with the responsibility of payment. In addition to potential credit impairment, you will incur interest charges and fees if you make late payments or minimum payments. Therefore, it is best to pay your credit card bills on time and in full each month.
Estimate your monthly payment
Before applying, make sure you’ve budgeted for your estimated monthly credit card payments. However, keep in mind that you should keep your credit utilization below 30% (or lower if you can). Your credit utilization rate is your current credit limit divided by your available credit limit.
For example, if you’re approved for a credit card and get a $10,000 credit limit, make sure your monthly bill doesn’t exceed $3,000. If your credit usage exceeds 30%, your credit score may drop because the ratio of revolving credit used for revolving credit to available revolving credit is too high. If you’re about to make a large purchase and want to use a credit card but want to avoid impacting your credit score, just pay for the purchase in advance (for example, a few days after your online account appears).
Set up autopay options
Check to see if the credit card you’re applying for allows automatic payments (most do) to simplify the payment process and ensure you pay your bills on time.
A single late payment can reduce your score by more than 100 points – but how much a late payment affects your score depends on factors such as your credit history and payment delays.
Most issuers do not report payments until invoices are at least 30 overdue. So if you forget to pay your bill and end up paying it late for days or even weeks, the issuer is less likely to delay payment as long as you pay the bill in full. However, if you only pay part of your bill, the card issuer is likely to report the payment late, which will cause your credit score to drop
7. Collect necessary information
Before you apply, make sure you have all the information you need to apply. This way, the process runs more smoothly and you can better evaluate your admissions chances.
Here is some information you should know beforehand:
full legal name
date of birth
social Security number
Other information you may need to know
The above information can serve as the basis for your application, but please be prepared to provide more details. For example, a card issuer might want to know how long you’ve been at your current address and whether you own or rent a home. You can also ask about your current employer, primary source of income and assets. You can also include your spouse’s or partner’s income in the application process, provided you have “reasonable access.”
Apply for a business credit card
If you are applying for a business credit card and your business is considered large enough, you can use an Employer Identification Number (EIN). Keep in mind that business credit cards may still ask for your Social Security number during the application process.
8. Select the method to use and perform the relevant steps
Before you apply, check out the different credit cards online to see which options are best for you. Then choose the card that interests you most and that best matches your qualifications. When it comes time to apply, you can apply in a number of ways.
The easiest way to apply for a card is through the card issuer’s website. The time it takes for a credit card to be approved varies, but you’ll likely get the fastest response by submitting your credit card application online. They can even get approval right away.
Another option is to apply in person. Receive a quick response to application approval and be able to ask questions about the card or application in real time. However, the physical location of some card providers can be difficult to find and you can only apply during business hours.
Over the phone
Although you must apply during business hours, applying by phone also allows for a quick response to your application. However, when applying by phone, you may have to deal with long wait times and queues.
Applying by mail is by far the least efficient of all options. You have to wait for the issuer to receive your application and wait for them to reply back, which can take weeks.
While you may initially be excited about getting a new credit card, your excitement quickly wears off when you fill out an application and wonder if you’ll be approved. But you can take the stress out of applying for a credit card by simply checking your credit history and running a report beforehand to see if you qualify.
If you meet the requirements for the required credit card, you have a good chance of being approved. If you don’t, check your chances of being approved for other credit cards and apply for a credit card that is more suitable for both.
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