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Having a credit card is helpful for a number of reasons. Credit cards are safer to use than cash or debit cards, and they’re one of the easiest ways to build credit. The best credit cards also frequently come with benefits like the chance to earn rewards for certain types of purchases, such as grocery store or travel purchases.
But searching for the right credit card for you — not to mention getting approved for a credit card — can be nerve-wracking. You might not know where to start, what information credit card companies (known as issuers) need from you or how to increase your chances of being approved for a card. That’s why it’s important to learn as much as you can about the application process and what you can expect from it before you apply for a credit card.
Read on to learn more about how to apply for a credit card and how to increase your chances of approval.
1. Know your credit score and what it means
Credit scores help issuers to determine your creditworthiness, or how likely you are to pay back a loan. That’s why a bad credit score can cause your application to be denied — and why it’s important you know your credit score before you submit an application.
You can request one free copy of your credit score and credit report every 12 months from each of the three major credit reporting bureaus: Equifax, Experian and TransUnion.
Alternatively, you can access your credit score for free through many financial institutions. First check if your bank or issuer offers this perk by checking its website, calling customer service or exploring your account. If it doesn’t, you can check your score with a service like Capital One’s CreditWise, Chase’s Credit Journey or American Express’s MyCredit Journey — none of which require you to be a banking customer to use them.
If you want to do a deeper dive, you can also look into your credit report. A credit score and a credit report are easy to mix up. Think of your credit score as a “grade,” like one you would receive in school. Your credit report is more like a file folder full of individual assignments and quizzes — a record of all your activity that went into that grade. If your score doesn’t seem quite right, check your credit report and make sure to dispute any errors if you find them.
The two main credit scoring systems are FICO and VantageScore. Here is a breakdown of the score ranges for each:
- 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 important to note that most credit cards have a credit score requirement that applicants must meet to be approved. For example, if you have a poor credit score, then you don’t want to apply for a card that requires a good to excellent score.
What to do if you don’t have a credit score
If you’re just starting with credit and don’t have a score yet, that doesn’t mean you can’t get a credit card. You’ll want to look for a credit card that requires no credit history, such as a secured credit card. These cards will help you to build up your credit score so that you can apply for better cards in the future.
For example, once you work your way up to a credit score in the good to excellent credit range you’ll have more credit card options to choose from, like rewards cards, where you’ll get the opportunity to earn cash back, points or miles on everyday purchases. With the right rewards card, you could potentially earn hundreds of dollars back annually or major discounts on hotels and flights.
2. Think about your needs
Once you know what cards you might qualify for based on your credit score, it’s time to think about what your needs are for a credit card. Are you looking to earn cash back or travel rewards? Or, maybe building credit first is your highest priority. There are lots of cards that will cater to each of these needs and more.
What to consider when choosing a credit card
Each card also comes with terms and conditions, including fees, offers, benefits and interest rates. Here are some aspects you should consider:
- Do you mind paying an annual fee? Check to see if the card you’re interested in has an annual fee and think about whether the annual fee would be worth it to you. For example, many rewards cards have an annual fee attached to them, typically varying from $95 to over $600 per year. Will you be able to earn enough rewards on your card to offset the fee?
- Will you be carrying a balance? Consider whether you’ll be carrying a balance on your card or if you’ll 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 interest rate or cards that offer a 0 percent intro APR for a limited period, such as 12 to 21 months.
- Do you want to earn rewards? If you have good to excellent credit, a rewards card that allows you to earn cash back, points or miles on qualifying purchases could be a great option to consider. You could earn rewards on everyday purchases at grocery stores, gas stations, restaurants and more, plus a flat rewards rate on all other purchases. Many of these cards also offer sign-up bonuses for new cardholders, along with other benefits like travel perks, shopping credits and purchase protection, among others.
3. Learn about credit card terms
There are a lot of different credit card terms you’re going to see on a credit card application, and it’s a good idea to have an understanding of those terms before you apply. Here are some of the basic credit card terms you’ll see and what they mean:
Some card issuers charge a yearly fee for the use of a credit card. Some credit cards that usually have an annual fee are those with luxury perks, like rewards and travel cards. Annual fees typically start at $95, but sometimes issuers will waive the annual fee for the first year for new cardholders.
The annual percentage rate, or APR, refers to the interest that will be applied to your credit account during a billing cycle. You’ll generally pay this interest if you carry a balance or pay a bill late. APRs are usually variable; they cover a certain range (for example, 15.99 percent to 22.99 percent) and are determined by the prime rate.
Types of APRs that you may see are:
- Balance transfer intro APR. Some cards offer new cardholders an intro APR of 0 percent for a select period (for example, 12 months) for balance transfers.
- Purchase intro APR. This interest is applied to all purchases. Similar to an intro APR for balance transfers, some credit cards offer a 0 percent intro APR for purchases for a select time, such as 12 months.
- Penalty APR. Missed or returned payments are subject to this higher interest rate. Many penalty APRs can be as high as 29.99 percent.
A balance transfer is when you move debt from one account to another account. If you want to pay off debt, you may want to transfer your debt to a card with a lower interest rate, or better yet, a balance transfer credit card with a 0 percent intro APR offer.
A cash advance is a loan you can take out against your credit card limit. Although it’s similar to taking cash out from an ATM with your debit card, a cash advance from your credit card is subject to both a high APR and transaction fees.
You may be subject to penalty fees if you pay a bill late, your payment is returned or if you exceed the maximum limit on your credit card.
Rewards rates come in the form of cash back, points or miles. A credit card will state which type of rewards it offers and how you can earn rewards on purchases.
Foreign transaction fees
If you want to use your credit card outside of the U.S., you may need to pay a fee for each transaction. Foreign transaction fees are usually around 3 percent. However, if you travel abroad a lot, you may want to look for a credit card that doesn’t charge foreign transaction fees.
Issuers often offer new cardholders a welcome bonus when they sign up for a new card. Typically, welcome offers allow you to earn a cash back, points or miles when you spend a certain amount on your new card over a specified period of time. Some issuers refer to a welcome bonus may as a welcome offer, intro bonus or sign-up bonus.
4. Check for preapproval
Before you apply for a card, check to see if you can be preapproved. Keep in mind, however, that being preapproved does not guarantee you will get the card you are applying for.
Bankrate’s CardMatch tool is a free resource that will match you with personalized offers through a prequalification process. This tool is great to utilize before applying for a new credit card because it involves a soft credit inquiry, not a hard credit inquiry. A soft credit inquiry won’t affect your credit, whereas a hard credit inquiry can lower your credit score and issuers will be report the inquiry to the three credit bureaus.
Additionally, it’s important to note that whenever you check your own credit score or report, it’s considered a soft credit inquiry, which means it will not hurt your credit score in any way.
5. Be prepared for your credit to be impacted when you apply
Most of the time, applying for a credit card will trigger a hard inquiry into your credit report, which 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 only 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 the issuer denies your application, it’s important to be mindful of when you apply for your next credit card. One hard inquiry on your report is a pretty neutral occurrence in the long run. However, applying for multiple credit cards over a short period — with their accompanying hard inquiries — would be a red flag for card issuers.
6. Determine a repayment strategy
Having a credit card comes with the responsibility of making payments. Making late payments or minimum payments opens you up to interest charges and fees, in addition to potentially hurting your credit score. For that reason, the best way to pay your credit card bill is on time and in full every month.
Estimate your monthly payments
Before you apply, make sure you have included your estimated monthly credit card payments in your budget. However, keep in mind that you’ll want to keep your credit utilization ratio below 30 percent (or lower than that, if you can). Your credit utilization ratio is the amount of credit you’re currently using divided by the amount of credit you have available.
For example, if you’re approved for a credit card and offered a credit limit of $10,000, you’ll want to make sure that your monthly statement never exceeds $3,000. If your credit utilization ratio is more than 30 percent, your credit score will likely drop because the ratio of revolving credit used to revolving credit available is too high. If you have a large purchase coming up and want to use your credit card but avoid a hit to your credit score, simply pay off the purchase early (such as a few days after it’s reflected on your online account).
Set up an autopay option
Check to see if the credit card you are applying for allows for autopay (most do) to help streamline the payment process and make sure you pay your bills on time.
Even one late payment can make your score drop by more than 100 points — but how much a late payment will affect your score depends on factors like your credit history and how late the payment is.
Most issuers won’t report a payment as late until a bill is at least 30 days past due. So, if you forget to pay a bill and end up paying it a few days or even a few weeks late, as long as you pay the bill in full, the issuer will likely not report the payment as late. But if you only pay a portion of the bill, the issuer will likely report the payment as late, which will cause your credit score to drop
7. Gather the necessary information
Before you apply, make sure you know all of the information you’ll need for your application. Early access to this information will help the process to go more smoothly, and you’ll have a better idea of your chances of approval.
Here is some of the information you should know beforehand:
- Full legal name
- Date of birth
- Social Security number
- Annual income
Additional information you may need to know
The above information will serve as the basis for your application, but be prepared to provide additional details. For example, the card issuer may want to know how long you have been at your current address and if you own or rent your home. It may also ask about your current employer, main source of income and any assets you may have. You can also include your spouse’s or partner’s income in the application process, as long as you have “reasonable access” to it.
Applying for a business credit card
If you’re applying for a business credit card and your business is considered big 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. Choose a method to apply and follow the associated steps
Before you apply, take a look at different credit cards online and research the best card offerings. Then, choose the card you’re the most interested in and qualified for. When it’s time to apply, there are a few different ways you can do so.
The issuer’s website
The easiest way to apply for a card is to submit an application through an issuer’s website. How long it takes to be approved for a credit card varies, but you will likely receive the quickest response if you submit your credit card application online. You may even be approved instantly.
Another option is to apply in person. You’ll receive a quick response on application approval, and you can ask questions about the card or application 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.
Over the phone
Although you will have to apply during business hours, applying over the phone will offer a fairly quick response about your application, too. But with phone applications, you may have to deal with long wait times and being put on hold.
Through the mail
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 it to mail back a response, which could take weeks. And, if you’re approved, you’ll still have to wait for your credit card to be delivered.
The bottom line
Although you may be initially excited about getting a new credit card, your excitement may quickly fade as you fill out the application and question whether or not you’ll be approved. But you can alleviate some of the stress of applying for a credit card simply by reviewing your credit score and report beforehand, and knowing whether or not you meet the requirements.
If you meet your desired credit card’s requirements, you’ll have a good chance of approval. If you don’t, look into your approval odds for other credit cards, and apply for one that’s a better mutual fit.