Having a credit card is helpful for so many reasons, and being able to get your preferred credit card starts with having a great application. Applying for credit cards can be done very easily these days and many times you know if you’ve been approved the same day. However, there are some important steps you should take to make sure you have the best credit card application possible.
How to apply for a credit card
A good credit card application will require some prep work on your part. The following steps will help you gather information to put your best application forward.
Know your credit score
Credit scores are used by issuers to determine your creditworthiness. Most issuers have a score range they are looking for in a cardholder. If you are just starting out with credit and don’t have a score yet, you’ll want to look for a card that requires no credit history. These cards will help you build up your credit score so that you can apply for other kinds of cards in the future. Once you’ve built up your credit score to the good to excellent range (670-850) you’ll have more options for cards, including rewards cards.
You can easily find out your credit score by requesting a copy of your credit report. You’re entitled to a free credit report from each of the three credit bureaus every 12 months. Bankrate also has a free credit reporting tool that allows you to monitor your score and notifies you of any important changes to your report.
However you choose to obtain your credit report, make sure you check over it thoroughly for any possible errors. If you find errors, you can take steps to dispute them. When you are sure the information in the report is correct, make a note of your score. This will be your guide for which cards are available to you now, and which cards you’ll have to improve your score to obtain.
Think about your needs
Once you know what cards are available to you, it’s time to think about what your needs are for a credit card. Are you looking to earn cash back, build credit, or earn travel rewards? There are lots of card possibilities out there that will cater to each of these needs and more.
Each card also comes with its own conditions. Check to see if the card you’re interested in has an annual fee and if that is something you are ready to pay. Many rewards cards have an annual fee attached to them. Will you be able to earn enough rewards on your card to offset the fee? Also consider whether you will be carrying a balance on your card or if you will be paying off your purchases in full. If you plan to carry a balance, the interest rate on your card will have a big impact on your monthly payments. You’ll want to look for cards with a low variable rate.
Applying for credit is often accompanied with plans for all the expenses you will cover and the purchases you want to make. During this process, however, it’s important to be realistic about what kind of credit card you are actually eligible for. For example, if you are first starting out with credit, you’ll likely get a small credit line. You also won’t be eligible for most rewards cards, as the vast majority of them require an established credit score in the good to excellent range. If your score is in that range, it’s still important to keep a level head. Make sure that the card you are requesting is going to add something new to your financial portfolio that your other cards don’t already offer.
Check for pre-approval
Before you apply for a card, check to see if you can be pre-approved. Being “pre-approved” or “pre-qualified” will involve a soft inquiry into your credit report to see if you meet the issuer’s criteria for opening an account. A soft inquiry has no effect on your credit score, unlike the usual hard inquiry that issuers will do when you apply for a credit card. Another benefit of being pre-approved is that you may receive a better rewards benefit or even better credit card terms through pre-qualified offers. Being pre-approved, however, doesn’t guarantee that you will get the card you are applying for, but it does give you a greater chance of doing so.
Be prepared for the impact to your credit
If you don’t pre-qualify for a credit card, you’ll have to do a normal application. This will trigger a hard inquiry into your credit report. This means that the card issuer will pull your credit report to check your creditworthiness. A hard inquiry will cause your credit score to go down a bit, but the effect is short term. The maximum amount of time a hard inquiry will stay on your report is two years.
If you apply for a credit card and your application is rejected, it’s important to time your next application well. One hard inquiry on your report is a pretty neutral occurence in the long term. However, having several hard inquiries on your report in a short period of time will be a red flag for card issuers.
Have a repayment strategy
Having a credit card comes with the responsibility of making payments on it. Whether you intend to pay off every purchase or to make the minimum payment each month, it’s important to have a plan for how you will handle your payments. Be sure to familiarize yourself with your interest rates and fees you may incur. And before you apply, make sure you have included your credit card payments into your budget. Lastly, check to see if the credit card you are applying for allows for autopay (most do) to help streamline the payment process.
What information do you need to apply for a credit card?
Hopefully the steps listed above have helped you to choose a few cards that you would like to apply for. Now it’s time to make sure you have all the information you need for your application. Here are some of the key pieces of information to have on hand:
- Full legal name
- Date of birth
- Social Security Number
- Annual income
This information will serve as the basis for your application. However, be prepared to give more details about this information. For example, your card issuer may want to know how long you have been at your address and if you own or rent. They may also ask about your current employer and the main source of your income.
Where do you apply?
When you decide to finally put in your application, you have a few options to do so. The easiest way to submit your application would be through your issuer’s website. Submitting your credit card application online will give you the quickest response for whether you have been approved or not. Another perk of applying online is the convenience of placing your application from anywhere at any time. You can also compare different credit cards on the issuer’s site to make sure you are making the best choice before you apply.
Other options for placing your application are to apply in person, over the phone or through the mail. Applying in person also yields a quick response to the approval of your application and you have the advantage of being able to ask questions in real time. However, it may be tricky to find physical locations for some card providers and you’ll only be able to apply during business hours. Applying over the phone will also offer a fairly quick response about your application, but you will have to apply during business hours, as well. And with phone applications, you may have the added hassle of hold times. Applying through the mail is by far the least efficient of all of the options. You will have to wait for your application to arrive to the issuer and also wait for them to mail back a response, which could take weeks.
What to do if your credit card application is denied?
If you find that, despite your efforts, your application is denied, it’s not the end of the world. It’s possible your application didn’t go through for a number of reasons. Go back to your initial research and look at what other options are on the table. Consider applying for a secured credit card to help build up your credit score. Secured cards simply require you to make a cash deposit as collateral. You may also want to consider applying for a retail credit card, which is often easier to get approved for. Just be careful about multiple applications in a short period of time. Most card issuers will see this as a red flag. In fact, Chase actually has a rule against it. It’s called the 5/24 rule and states that if you open five or more new credit cards (from any issuer) in 24 months, you’ll automatically be denied for a new credit card from Chase.