Are you preparing to apply for your first credit card? It is generally a simple procedure to apply for a card, however, the tricky part is getting approved.
Card issuers differ on how they look at applicants’ eligibility for a credit card. This could make it difficult for you as an applicant if you are applying to more than one institution.
This article covers the top tips on how to improve your chances of approval. Read on to learn more.
Credit Card Terminology You Should Know
Before we share a few tips on how to enhance your chances for credit card approval we want to ensure that you know some of the terminologies you are going to encounter.
To compare the pros and cons of different credit cards you’ll have to understand these important factors.
An individual’s credit score is determined by factors such as whether you pay bills on time and the length of time you’ve used a credit product. Your credit score is one of the first aspects card issuers look at when considering your application.
The score is typically classified by credit card issuers in the following ways.
- If your score is lower than 629, you are considered a high-risk person with bad credit.
- A good credit score would be between 690 and 719 and an excellent credit score is 720 or more.
A credit card’s interest rate is the price that you pay the bank for borrowing money. With credit cards, the interest rates are generally stated as a yearly rate, which is called the annual percentage rate or APR. This rate can be fixed or variable depending on the terms of the card.
According to the Federal Reserve, the average credit card interest rate for November 2022 was 20.40%.
The annual fee is the amount payable every year to the bank for the administration of the card. A credit card can come with or without annual fees.
The credit card issuer can charge fees on a variety of transactions, like cash withdrawals, purchases, foreign exchange, ATM usage, and more.
Tips for Applying
Before applying for any card, search the internet, and compare the terms and conditions. Compare at least the interest rates, annual and transaction fees and the requirements regarding your credit score, as well as the benefits offered.
Improve Your Credit Score
Get your credit score from FICO score, which is one of the most prominent scoring models in the US. If your credit score is low you’ll have to improve it.
Your score will rise if you make all your account payments on time and avoid new debt. About a third of your credit score is determined by how much you owe.
Sometimes banks state clearly what the minimum required credit score is to qualify for a specific card or card option. If your score is lower than the required score it is a waste of time to apply.
However, there are cards developed for people with bad credit and low scores. Start by applying for these to work on raising your credit score.
Declare Your Income
Your credit score does not reflect your income. Card issuers use your income to determine your ability to make a card’s compulsory payments.
If you earn money from more than one source regularly, declare all the income. If you’re 21 or older, you can also include your spouse’s or partner’s income.
The more regular income you have the better your debt-to-income ratio. A good debt-to-income ratio improves your chances of getting your application approved.
You might be more successful when applying for your first card if you apply for a secured credit card where you have to deposit an amount on approval. As your creditworthiness increases, you can “upgrade” to cards with more benefits.