Preparing for a first credit card application is straightforward, yet approval can be the real hurdle. A little preparation improves your odds and helps avoid avoidable declines.
Card issuers evaluate eligibility in different ways, which means the same profile can be viewed differently across institutions. Coordinating applications and aligning them to what a lender prefers reduces wasted inquiries.
This guide highlights practical steps that raise approval odds and reduce friction during the process. The sections ahead explain the key terms and actions to focus on first.
Credit Card Terminology You Should Know
We want to ensure that you recognize the main terms you will encounter, since that context makes the tips more useful. Knowing the language lenders use helps you compare offers and understand what affects approval.
Meaningful comparisons depend on a working grasp of a few factors that appear in every offer. A clear view of each one keeps trade-offs visible while you decide.
Credit Score
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.
Interest Rate
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.
The Federal Reserve reported an average credit card interest rate of 20.40% in November 2022, a level that makes carrying a balance expensive. High rates magnify small mistakes, so minimizing interest matters.
Annual Fees
The annual fee is the yearly amount a bank charges to administer a card, and some products skip it while others do not. Consider the fee alongside benefits to judge whether the value balances the cost.
Transaction Fees
Issuers may apply fees to cash advances, purchases in foreign currencies, ATM use, and other activities. Reviewing the fee schedule in advance keeps surprises off your statement.
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.
Conclusion
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.
