For many people, applying for a credit card is an exciting and sometimes intimidating experience. The fact is, there’s a lot riding on the outcome. Credit cards can have some amazing perks and benefits, but credit cards are not without their risks.
Before you rush to apply, there’s a few things to handle that will help you make an informed decision that suits your needs. Here’s everything you need to know about applying for a credit card.
Check Your Credit Score
Before applying for a credit card, you should familiarize yourself with your credit scores and how they work. Most cards list a credit score requirement that applicants must meet to get approved. While it’s not the only factor that card issuers evaluate on your application, your credit score plays a significant role in the application process.
Credit scores are essentially measures of someone’s credit risk. Issuers typically classify your creditworthiness as either bad credit (300-629), fair credit (630-689), good credit (690-719) or excellent credit (720 and up). Credit scores are calculated by algorithms using information from your credit report. Some scores may look a little different among the three major credit bureaus: Equifax, Experian and TransUnion. If they vary only slightly, then it’s not usually a cause for concern. But if your credit score looks wrong, then it could be worth looking into your credit reports to search for any unexpected negative information.
For a limited time, the three national credit reporting agencies will let you check your credit reports once per week (ending Dec. 31, 2022). Free credit reports won’t actually show you your credit score, but they do show you your credit history. To find your credit scores, find out if your bank and issuer offer free access to your credit scores. If you’re already a primary cardholder or authorized user, you may be able to view your FICO score for free through the issuer. Otherwise, there are other free and paid options online that can closely tell you your credit score, including VantageScore and MyFICO.com.
Your credit score is one of the biggest factors issuers look at in a credit card application, so know where you stand and what your credit score needs to be in order to get approved.
Assess Your Needs
Before you apply for just any credit card, you’ll need a game plan. Why do you want the card: to build credit or to pay off debt? Are you seeking travel benefits or cash back? Will you carry a balance or will you want interest-free financing? Like shopping for a car, you’ll want to think about your needs and know which card will get the job done best.
The good news is that there are credit cards out there that cater to almost anyone. Map out your needs as it relates to the credit card that best fits your needs and spending habits. Some things to consider when comparing credit cards are annual fees, interest rates (APR), rewards programs, sign-up bonuses and other benefits like purchase protection and shopping credits. If you’re new to credit cards or have poor credit, consider looking at secured credit cards.
How to Fill Out the Application
What you put on your credit card application is very important, as the card issuing company is assessing your information to decide whether to approve an extension of credit – just like they would if you were applying for a loan. As a result, there’s a lot of sensitive information that they could request. Make sure you’re prepared to answer these questions on a credit card application.
Social Security number
Most issuers in the United States will ask for a social security number or tax identification number (for business credit cards) on the credit card application. This helps credit card companies identify the applicant. It’s also used by issuers to check your credit history. As long as you’re dealing directly with the issuer, it’s safe to provide this information.
The more income you have, the more likely you are to be approved and to receive a sufficient line of credit. Borrowers over the age of 21 can list any income to which they have “reasonable expectation of access,” according to the Credit Card Act of 2009. This includes personal income, income from a spouse or partner, allowances and gifts, trust fund distributions, scholarships and grants, retirement fund distributions and Social Security Income. Applicants aged 18 to 20 can include personal income (including allowances) and scholarships and grants.
It’s important to make sure that the income you report on your application can be verified through documentation. Lenders may ask you to submit information to verify your income when you’ve stated that you make above a certain amount. It’s acceptable to give a rough estimate of your annual income, but if you’ve inflated your income significantly, you could face legal trouble.
Finally, keep in mind when filling out the income section on a credit card application that annual gross income means what you make before taxes. Your income can also include your tax refund, stimulus check, child support and other income that can be proven with documentation.
A common question that follows your income is about employment status. Full time, part time, self-employed, retired and student are some of the common options. Banks want to see that their applicants are financially stable, so they’ll use this information as another piece to the puzzle. As mentioned earlier, there are cards offered to cater to any need, including those who are unemployed, so long as you have other sources of income. You can check if being unemployed is not a deal-breaker for the card you want by looking online or contacting the issuer.
Type of Residence
Some credit card applications will ask about your residence and whether it is rented or owned by the applicant. If you don’t classify as a renter or owner, there is typically an “other” option. Again, this information is used to assess your financial risk. Issuers may flag information on your residence depending on its legitimacy and could deny your application as a result, so make sure that information is accurate.
When prompted for your contact information, you’ll want to use your legal name and U.S. home mailing address, as P.O. boxes may not be accepted. You may also be asked to provide your email and phone number so the issuer can contact you.
The credit card application may ask if you’d like to add an authorized user. An authorized user is basically another user who is able to use the credit card account to make transactions and build their own credit score.
The account, and the responsibility to repay it, still remains under the name of the primary user, however. Select whether or not you want to have an authorized user if it’s asked on the application.
Deposit (for Secured Credit Cards)
A deposit is only a requirement for secured credit cards. If you’re applying for one, you may have to show how you’ll pay for the security deposit. Typically, the deposit eventually equals the credit limit on secured accounts.
At the end of credit card applications, you’ll have to check a box that you agree to the terms and conditions, which are stated in the fine print. It’s also an acknowledgement that the applicant provided accurate information. Before you submit your application, make sure you’ve reviewed it carefully.
Where to apply for a credit card
Before you apply for a new credit card, you may want to consider getting prequalified or preapproved for the card using online tools. While they won’t necessarily guarantee that your actual application will be approved, they are about as close as you can get to the real thing and come without any deductions to your credit score. Other than that, here is how to apply for a credit card.
The easiest and fastest way to submit your application is directly through the issuer’s website. While the time you’ll hear back varies, you’re likely to know your outcome sooner by submitting online through the issuer. You may even see the result instantaneously.
Another option is to apply in person at the issuer’s physical office. This may be beneficial because you’ll receive a fast response, and you’ll be able to ask questions in real time.
You may also be able to apply over the phone, which usually can yield quick results, although you might have to wait on hold for a while.
Mailing in your application is the slowest way to hear back from the issuer, as you’ll have to wait what could be weeks for mail to send and arrive.
What to do if your application is denied
Don’t let it get you down if your credit card application is denied. There are a few things you can do in this case.
Most importantly, you’ll want to know why your application has been rejected so you can work to improve it next time. Lenders are bound by the Fair Credit Reporting Act to tell you why you’ve been denied by sending you what’s called an adverse action notice either electronically, verbally or in writing. If it’s being sent via mail, it typically arrives seven to 10 business days after the application was refused. You can also call the card issuer, discuss your application, and ask for it to be reconsidered based on any new information that you can provide.
Additionally, it’s typically recommended that you wait six months to one year before applying again. Getting denied on your application does not cause harm to your credit score. Actually, the thing that can reduce your credit score a little is the hard inquiry done during the application process. That’s why you should be wary of applying for credit cards too often.
Lastly, before you apply for another new credit card, you should identify the application requirements you’ll need and why you’ve been rejected before. If you continue to be denied, then consider options like a secured credit card to help your chances of being approved the next time.