Applying for a Credit Card

Genae-Valecia Hinesman
Stack of credit cards

Applying for new credit is a process that should not be undertaken lightly. Knowing how to select the card that is right for you and how to maximize your chances for approval will have a positive, long-term effect on your financial future.

Know Your Score

First, determine your credit score. Typically, credit cards with the most attractive rates and features are reserved for those with excellent to good credit scores. People with average credit will also have some attractive options, but may not be eligible to get premium interest rates and benefits until their score increases.

Understanding Score Ratings

Those who have lower scores due to credit problems in the past are not excluded from new credit accounts but may find that standard credit card options are closed to them until they improve their credit profile with the judicious use of cards designed for their situation. Generally speaking, credit scores of 800 and above are considered "Excellent." Scores ranging from 799 to 740 are deemed "Very Good," and scores of 739 to 670 are thought to be "Good." A score of 669-580 is "Average," and scores of 579 and below are said to be "Poor."

Request Your Score

You can request your score from any one of the three credit bureaus: Equifax, Experian, or TransUnion. Alternatively, you can register for free with credit monitoring sites like Credit Karma to see your current score. These sites also provide suggestions for improving your credit and credit simulators that show you how your score will be impacted if you perform various hypothetical actions. This information is invaluable before you apply for a new credit card.

Research Your Options

Most consumers are aware that there are many types of credit cards and no two credit cards are alike. That being said, the most important part of the application process after knowing your credit score is researching several different credit cards. Major brands like Mastercard, Visa, and Discover all have subcategories with widely varied features designed to be attractive to different consumers.

Use Databases for Card Information

Some credit monitoring services offer features to help you research different cards as well. For example, Credit Karma has a tool to view actual consumer reviews of credit cards, see profiles of their interest rates and features, and determine your odds of approval before you apply. You can also find out about annual fees and late fee charges.

If you choose not to use a site like Credit Karma, there are other databases on the web that can provide similar information, such as the card database on Card Ratings. The Consumer Financial Protection Bureau also offers a database that lists hundreds of credit card agreements searchable by bank issuer. Specific banks may also offer comparison tools of the cards they offer, such as Bank of America's Compare Credit Cards page.

It's important to keep in mind that these tools may only list general terms and agreements along with pricing and fee information. Specific rates will vary according to the individual.

Consider Interest Rates

road sign warning of interest rates

As a general rule, avoid cards that charge high interest rates (above 25 percent). Those with challenged credit will typically be offered higher rates but should look for those no higher than 20 to 24 percent. If your credit score is low, shop around for secured cards. These are credit cards that you apply for after making a cash deposit, usually equal to the amount of the credit limit to be issued, which secures the credit line. This makes extending credit low-risk for the credit card issuer.

With timely payments, your credit score will improve, and the best secured cards will convert to standard, unsecured credit cards with higher limits and more attractive consumer features, like lower interest rates and cash back promotions on purchases. You may even be able to get back the amount initially deposited.

Look at Customer Reviews

Check independent, non-company sponsored customer reviews and take the time to read them. Poor customer service, unwieldy customer website interfaces, lack of timely posting of your payments, or not issuing credit limit increases after a year of responsible credit usage are all warning signs.

Be Strategic

Your research should have resulted in several attractive card options that are right for you.

Narrow It Down to Two Cards

Compare credit card options and try to narrow these down to no more than two major credit cards. Unlike installment loans such as a car or a mortgage, submitting multiple applications for credit cards within a short period of time is considered a hallmark of risky and irresponsible consumer behavior by creditors. This will impact your credit score negatively. Allow at least six months between applications for new credit cards.

Be Aware of Credit Limits

Consider the possible credit limit of the card for which you are applying. If you can realistically keep your credit usage, or utilization, to 30 percent or less of the full amount, and consistently make your payments on time, the card in question could help you increase your overall credit score and improve your odds of receiving a higher credit limit (and gaining greater buying power) in the future.

Improve Your Chances

Before applying, reduce your overall outstanding debts and retain proof of payments (such as receipts) that you can submit/upload as proof that your debt-to-income ratio is desirable. This will show the creditor that you have the ability to repay your debts. Avoid any new debt while applying for new credit.

Complete the Application

Now that you've done your research and narrowed down your options, it's time to apply. It's easiest to fill out the credit card application online.

  1. Enter the credit card issuer's online portal and open the application form.
  2. Provide the information requested and be as honest as possible to the best of your knowledge.
  3. Never overexaggerate your income, however, you can improve your chances for approval by including all monthly or annual income, both from employment and any additional income from investments or payments you may receive from other sources.
  4. Before submitting your application, the form will ask you to provide an electronic signature. This is as legally binding as a handwritten one.

Successfully Apply for the Right Card

Educating yourself about credit in general and what credit card options are available to suit your needs will go a long way toward improving your chances of being accepted for a new credit card. Be responsible with your credit and make timely payments and you can continue to get better options as time goes on.

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Applying for a Credit Card