Credit cards offer one of the easiest ways to build a strong credit history that will last a lifetime. Still, getting a credit card approved isn’t always as easy as it looks.
If you’ve never had a credit card before or have a very limited credit history, it can be difficult to find a bank that will give you a chance. And if you have bad credit or a bad credit history, your chances of being approved for the credit card you want could be even worse. But with a little planning and a little foresight, you can dramatically improve your chances of getting approved.
Before you apply, read these tips and consider some of these moves:
1. Know your credit score
Before you apply for a new credit card, it’s extremely helpful to know your actual FICO score — or at least get an estimate of it. If you don’t have a credit card at all, websites like Credit Karma and Credit Sesame will give you a free estimate of your credit score. Although the “free scores” you get on these sites are only estimates, they can give you a good idea of where you stand.
Some credit cards also offer their cardholders a free preview of their FICO score on their monthly statements. If you already have a credit card, you can check if your card offers this benefit.
Knowing your credit score or an estimate of it is one thing, but you also need to know what your score means and if it’s high enough to qualify for a credit card. We recently looked at what constitutes a good credit score, and according to credit expert John Ulzheimer, here’s how credit score ranges tend to stack up and down:
- A credit score of 760 or higher is considered excellent credit.
- a score between 701 and 759 is considered good credit.
- About twenty 651 to 700 is considered fair credit (695 is the national average).
- Less than 650 is considered bad credit.
The higher your credit score, the more likely you are to be approved for a credit card. So is your score high enough? Various studies have indicated over the years that only 39.1% of all applicants have been approved for general purpose credit cards. However, 58.7% of Americans with “prime” credit scores – those between 660 and 720 – were approved, and 85.5% of applicants with “superprime” credit scores (720 or higher) were approved. approved.
There are other variables that can determine whether you’re ultimately approved or denied for a credit card, but once you know your credit score, you’ll have a better idea of your chances. And if your scores are on the lower end of that spectrum, you’ll know it’s time to make a few changes — paying off balances and paying bills on time — to get those numbers moving in the right direction before you apply for a credit card. .
2. Check your actual credit report for free
In addition to your credit score, it may be helpful to obtain a copy of your actual credit report. Fortunately, you can get a free copy of your credit report from the three major credit reporting agencies – Experian, Equifax and TransUnion – for free, once a year.
All it takes is a visit to AnnualCreditReport.com to get a free copy of your credit report. Just visit the website and enter all your information, and you will soon see all the information shared on your report.
If everything reported is accurate, you have nothing to worry about. However, if you find an error, you should do everything possible to fix it immediately.
3. Make all your monthly payments on time
If you take a close look at how your FICO score is determined, you’ll notice that the most important factor that plays into your credit score is your payment history. In fact, your payment history makes up 35% of your credit score.
If you need to improve your credit before applying for a rewards credit card — or just want to keep it in top shape for the long term — paying all your bills on time is the best and easiest way to do it. . Conversely, missing a payment or paying your bills late can wreak havoc on your credit score in the blink of an eye. You should avoid making late payments on any of your bills if you can.
4. Pay off your debt
Another important factor in your credit score is your use of credit. This term, usage, is used to describe how much money you owe relative to your credit limits. While using some of your available credit is generally a good thing, having too many large balances is frowned upon and reflects negatively on your credit score.
Most experts suggest keeping your credit utilization below 30%, which means if your credit limit is $1,000, you shouldn’t have a balance above $300. When you’ve used more than 30% of your overall credit limit, it makes you more risky to lenders and can cause your credit score to drop.
When you’re paying off your debts and your utilization is below 30%, on the other hand, your credit scores will have the best chance of going up – and they will do so immediately. So if your credit scores are borderline, pay off any outstanding balance before applying for a credit card to give yourself the best chance of being approved.
5. Look for the right credit card offer
While you may be eager to get any type of credit card, it’s important to take the time to research the best deal and find one that meets your needs.
If you want a credit card to consolidate your debt, for example, you can start by looking at balance transfer credit cards that will allow you to pay no interest for a limited time. If you’d rather earn rewards, there are dozens of great rewards credit cards that offer everything from cash back to airline miles. Additionally, some cards offer lucrative welcome bonuses if you spend a certain amount on your card in the first three or four months.
Once you’ve found a card that seems to fit your spending habits, applying is as easy as filling out an online application, including your personal information and income details. Most credit card issuers will get back to you within minutes.
Remember that the best credit cards and the best deals usually go to those with good or excellent credit. If your credit needs some work, you may need to consider another type of credit card to get started.
6. Consider a secured credit card as a last resort
If your credit scores aren’t high enough to qualify for a traditional credit card, you should consider a secured credit card to get the ball rolling. Unlike unsecured credit cards that actually extend a line of credit to you, secured cards offer credit tied to a cash deposit you deposit.
For example, many secured credit cards offer a $500 credit limit but require a $500 deposit to get started. Although it may not seem advantageous at first, secured credit cards are often the only way for people with bad credit or no credit to increase their credit score.
Once you start using your secured card responsibly, paying it off every month, your credit score will improve and you can usually upgrade your card to an unsecured credit card and get your deposit back. If your credit score improves significantly, you might even be able to qualify for a credit card with higher rewards after stretching using a secured card. It really depends on your situation, your goals, and how you improve your scores.
7. Use your credit wisely and never give up
If you’re not able to qualify for a credit card right now, the best thing to do is give yourself some time. By using the credit you have responsibly — paying utilities, car payments, and student loan bills on time, every time — you’ll put yourself in the best position to increase your scores over time. And if you have defaulted bills, a lot of debt, or other negative marks on your credit report, you should focus on repairing those damages before taking out more credit anyway.
Pay all your bills on time, refuse new debts and pay off old ones, and watch for small changes in your credit reports for signs of progress. Over time, your scores will inevitably increase as long as you treat it with the respect it deserves.
[This article was first published on The Simple Dollar in 2020. It was updated in March 2022.]