It’s real easy to go out and apply for credit these days, but getting approved for the credit that you apply for is an entirely different story. In this article, we are going to look at how you can apply for a credit card so that you are more likely to get approved.
Step 1: Know Your Credit Score
From the get-go, certain lenders will not approve you for credit with them if you haven’t achieved a certain credit score. According to data from Experian (a major credit bureau), these are the ranges that an individual’s credit score can fall into:
Exceptional (800+): Consumers who have a credit score that is higher than 800 have usually spent years building their credit by making on-time payments, keeping balances low, and monitoring their credit regularly to learn what they can do better. These folks make up about 1% of the population and have a very easy time getting approved for new credit.
Very Good (740-799): This credit score range will put a consumer above the average for American credit management resourcefulness, and Experian predicts that only 2% of people with this score level will ever become delinquent. Generally, this range also has a very easy time obtaining new credit.
Good (670-739): A “good” credit score is usually where most Americans sit. They don’t manage credit excellently (i.e. paying off all balances immediately and never missing a payment), but they haven’t ever been delinquent and probably won’t. This score range can get approved for most, but not all, credit. Also, the interest expense for these types of borrowers tends to be higher than for those who have very good or excellent credit.
Below Average (580-669): A score in this range likely means that you have missed a couple of payments, and about 1 in 4 borrowers who have this score will probably become delinquent on their payments in the future. Obtaining credit at this level can be difficult.
Poor (579 and down): This type of credit score is usually reserved for those individuals who are incredibly poor credit managers. They will often have incurred bankruptcy or other large credit hiccups. Getting approved for credit in this range will usually require a secured collateral or a large annual fee for the lender to take the risk.
You can discover your credit score for free by signing up at Credit Karma or using one of the free score services that may be provided by credit cards that you already own.
Step 2: Only Apply For Credit Cards that Match Your Credit
Often, credit card companies will detail on their sites the kind of credit score that they expect you to have in order to stand a reasonable chance of approval for the card that you want. Alternatively, forums like MyFico can help you determine the score range that you will need to be in in order to get approved for that fancy new rewards card.
With that said, just because you don’t fall into the normal parameters for a card’s approval range does not necessarily mean that you won’t be approved for credit. Which leads me to my next point…
Step 3: Pre-Qualify if You Can!
Thankfully, many credit card issuers now offer a pre-qualification process for their card products. If you find that the credit card you want offers a pre-qualify tool, you should use it to determine, immediately, whether the card issuer thinks that you will be a good fit for their product or not.
However, even if you are not pre-qualified for a particular card does not mean that you would not be approved for that card if you went ahead and officially applied for the credit, but it absolutely gives you a fairly solid indicator of your chances.
There is actually an incredible pre-qualification tool out there called Cardmatch that will allow you to attempt to pre-qualify for many cards at once.
It is important to note that pre-qualifying, unlike actually applying for a credit card, will not hurt your credit score. A credit card application requires a “hard pull” of your credit report, which typically dings your score for about ten points and lasts on your report for up to two years, while a pre-qualification uses a “soft pull” on your credit report that will not harm your credit score.
Step 4: Include All of Your Income
Creditors like to know your income information in order to have an idea about how much credit they can lend to you reasonably without taking the undue risk that you will become overextended and not pay them back.
As a result, don’t be put off by the income questions on a credit application, and make sure that you put down what all of your income really is. Furthermore, things like social security distributions, alimony, and even tuition (if you aren’t the one paying it) can be included as income in many circumstances.
Step 5: If it Fails, Take Some Time
Being rejected for a credit card really stinks. Often, it will hurt your credit score for a little while as a result of the hard pull made on your account, and it lessens your chances of being approved for other cards in the near-term.
As a result, if you have recently been rejected for a credit card application, or if you don’t think that you would be approved right now for the high-style rewards card that you want, it may be worth it to take a few months or even a couple of years and just work on your credit score to make sure that it is in a great place for when you do decide to apply (or re-apply, in some instances).
As Cynthia Meyer of Forbes.com has reported in the past, some of the main things that you can do to improve your credit score quickly are:
- Pay off any outstanding balances that you may have. This will serve to reduce your credit “utility”, meaning the amount of credit that you are using when compared to how much credit is available to you, and a lower credit utility will improve your score.
- Aim to make consistent, on-time payments. Even if you are only able to pay the minimum balance that is due each month, recording on-time payments for a few months at a time will serve as a boon to your credit score. Of course, you should seek to pay your balance in full eventually.
- Obtain a copy of your credit report and fix errors. Often, creditors will accidentally report events to the wrong accounts or something odd besides that will happen and you may find that your credit report has inaccurate information on it. By contacting the credit bureaus and removing this false information, your score should improve.
If you take these steps, you should be able to apply for a credit card in a way that makes you more likely to get approved. Or, if you are afraid that you won’t be approved at first, following our tips for improving your credit score should help to strengthen your resolve (and your score!) over time.