Applying for a credit card is a seemingly straightforward task. Input your information, wait for the results, and boom — there’s plastic in your hand and you can start swiping, right? Well, it’s a bit more complicated than that. There are a few things to keep in mind when applying for a credit card, but with some research and preparation, you can ensure that you’re setting yourself up for success before you ever even fill out the application.
Read the scoreboard
You didn’t think you’d get through a blog about credit cards without hearing about credit scores again, did you? Unsurprisingly, your credit score will be the single largest determining factor when it comes to applying for a credit card. If you’ve got your eye on a rewards credit card, keep in mind that lenders will usually require a good (690–719) to excellent (720 or more) credit score. If you have bad (300–629) or average (630–689) credit, applying for a high-rewards card might not be the best idea. There are plenty of other card options that exist for all types of credit scores so don’t feel like all is lost. Of course, knowing your score in the first place is vital knowledge so be sure to use any of the many free credit reporting options available before shopping around.
Pump up those numbers
If your score is lower than you’d like it to be, start making steps and commitments to increase your score. Paying bills on time, avoiding any new debt accrual, and keeping your credit balances low will help to improve your overall score. Keeping your credit utilization ratio (your balance divided by your credit limit) low is a great way to improve your credit score. If you can keep that ratio below 30%, you’re in good shape, so try to keep tabs on your spend!
Know what you’re looking for
When armed with a detailed understanding of your credit score, you can make decisions on which card you want to apply for with more confidence. As we talked about before, if you have average credit then a lucrative cash back credit card might not be worth applying for and potentially negatively impacting your credit score. Many card providers can give you detailed requirements for approval and there are resources online that can help determine if you pre-qualify for certain offers. It can be tempting to submit an application for a fancy looking rewards-based credit card, but do your homework and be sure you’re applying for a card you can realistically get approved for.
Do your due diligence
While credit card companies look at how much debt you have, they also take into account what your income looks like. The higher your income in relation to the debt you hold, the better your risk ratio. So when completing a credit card application, be sure to include ALL income streams. If you have a few side hustles outside of your normal 9 to 5, include that extra revenue on your application. If you’re over 21, you can also include a spouse’s earned income as part of your combined earnings.
Applying for a credit card is a big moment in any consumer’s life. It can feel oddly intimate and even intrusive at times with the types of information and questions being asked of you. However, when you do the hard work at the beginning of the process you help improve the chances of success down the road!
