Applying for a credit card today is often as easy as handing over a couple of pieces of information and waiting for a response. Getting approved for a credit card, however, is a different matter.
The good news is that card approvals are on the rise. A Consumer Finance Protection Bureau (CFPB) report indicates that the approval rate for all types of credit cards, whether your rating is superprime to subprime, is up to 39.1% across the board from a low of 36.2% a few years ago.
However, that still means 6 out of 10 applications are not accepted. Here is what you need to know if you want to get approved for a credit card and some tips to help you make the right credit card choices.
Make sure you’re ready for a credit card
Just because you’re old enough or can qualify for a credit card doesn’t necessarily mean that you’re ready for one. Using credit is a big responsibility, and it’s important that you only use it to buy stuff you can afford. If you don’t manage your credit properly, it can be a disaster for your credit.
Step 1 : Know your credit score
Before you apply for a credit card, you should know your credit score.Your credit score is one of the most important factors that a card issuer will use to determine whether or not to approve your application.Banks and credit unions vary some with their ratings, which are generally based on a FICO score, but a general classification is:
- 559 or below – deficient credit
- 560 – 639 – poor credit
- 640 – 699 – fair credit
- 700 – 749 – good credit
- 750 – 850 – excellent credit
You can find out your credit score for free here. If you’re interested in a rewards credit card or a credit card with a 0% introductory period, you will likely need good to excellent credit to qualify. So if your credit score is lacking, you might want to take some steps to improve your finances before you apply for a credit card.
Step 2: Improve your credit score
One-third of your credit score reflects your total amount of debt.The rating bureau looks at what is called your credit utilization ratio, which is the amount of debt that you have divided by your credit limits. This ratio should be less than 30% on all of your current cards.
For example, if you have a credit card with a $1,000 credit limit, your outstanding balance should be less than $300 at all times. Paying down existing credit card balances is one way to improve your credit score. Other ways to improve your credit score include disputing any incorrect items on your credit report and having a diverse credit profile. You can get a free credit report once a year at annualcreditreport.com.
Step 3: Reduce your debt by as much as possible
Reducing your overall level of debt involves more than just paying down credit cards. If you have outstanding medical bills, student loans, or personal loans, pay down the balances on those debts. This will improve your credit and your chances of getting approved for a credit card.
Step 4: Apply for a credit card that fits your credit profile
Once you know your credit score, target credit cards that fit your credit profile to increase the odds of acceptance. If you have poor credit, you wouldn’t want to apply for a rewards credit card that requires good to excellent credit.
Each time you apply for a credit card, the credit bureaus make a note of your inquiry on your credit report. Too many inquiries in a short period will have a negative impact on your credit score. If you’re not sure about your qualifications, research the company. SuperMoney provides expert reviews and makes it easy to filter credit card companies by their eligibility criteria.
Step 5: Include other factors on your application
While most credit card issuers use credit score as their primary decision factor, it’s not the only variable they consider. Credit card companies also want to know how much money you make so that they can calculate your debt-to-income ratio.
Your debt-to-income ratio is your total monthly debt divided by your gross income. The requirement will vary by lender, but 43% or below is commonly used as an acceptable benchmark. If yours is higher, you might want to pay off some debt before you apply for a credit card.
Also, make sure that you include all of your income. Understating your income on a credit application will lessen your chances of approval.
Step 6: Choose the right credit card for your needs
Before you shop for credit card offers, decide how you are going to use your credit card. Will you pay off your balance every month or are you looking for a credit card to finance a major purchase? If you think that you will carry a balance, look for credit cards that have the lowest annual percentage rates (APRs). You also might benefit from a balance transfer card with a 0% APR introductory period.
On the other hand, if you pay your bill in full every month, other factors might be more important than the APR. You might want to find a card that has no annual fee. Another option is a credit card that either gives you cash back or travel rewards.
Step 7: Don’t give up if you don’t get approved for a credit card
If you’ve applied for a few credit cards that match your credit score profile and are still denied, don’t give up too easily. Nearly all credit issuers have a reconsideration line that you can call to discuss your case.
When you call this number, always be polite and make sure that you have a copy of your credit report handy. Be ready to address any negative items and explain to the agent why you are a responsible borrower.
Which credit cards are easier to get approved for?
Your income and credit score will determine which credits are easiest to get approved for.
If you have a fair credit score, which is between 640 and 700, you should apply for the Chase Freedom Visa card. This is a balance transfer credit card that also offers generous rewards. You get a 15-month 0% introductory APR period followed by an APR that ranges from 15.49% – 24.24%. There is no annual fee for this card and a straight 1% cash back program. You also get 5% cash back on revolving categories as well as a $150 signup bonus for making minimum purchases in the first 90 days.
Another good choice for those with fair credit is the Citi Double Cash card. This Mastercard has a longer 0% introductory APR period (18 months), followed up by APRs ranging from 13.49% – 23.49%. This is also a cash back card, but without the rotating categories. Instead, you get 2% back on all purchases, 1% when you buy, and another 1% when you pay your bill. There is no annual fee with this card.
If your credit is a bit more challenged, let’s say 600 or lower, apply for the Indigo Platinum Mastercard. Issued by Celtic Bank, you can pre-qualify for this card without a hard pull on your credit. There is an annual fee that ranges from $0 to $99, with APRs starting at 23.9%. This card doesn’t offer cash back or miles, but you do have access to Mastercard Gold benefit, which includes such things as price protection and travel assistance.
Other options if you can’t get approved for a credit card
Let’s assume that you just can’t qualify for an unsecured credit card right now. You still have a few options.The first thing you should do is see if there is anyone who might agree to cosign on a credit card.
The next option is to get a secured credit card. The USAA Secured American Express® card is an excellent choice. You can qualify for a secured credit card by placing the equivalent amount in a USAA CD account as security. This is a great way to build your credit and eventually qualify for an unsecured credit card.
If you don’t qualify for the USAA card, check out the Secured Mastercard from Capital One. With just a $49 deposit, you can start with a $200 line of credit. You can increase that credit line simply by depositing more money into an account, up to a total of $3,000.
A final option is getting added as an authorized user on someone else’s credit card account. Your credit activity will reflect on your credit report, but it won’t have as much weight as a co-signer or unsecured credit card.
Shop around for the best deal
When you’re looking for a credit card, shop around for the best deal. Compare factors such as the APR, any fees, rewards, and introductory offers. If you have just fair credit and don’t qualify for the best deals, your terms can improve if you handle your credit wisely. Make your payments on time, and you might qualify for a lower APR or higher limit in just six months.
Ready to find the right credit card? Search the best credit card offers now and apply for one that fits your credit score profile.