There is no doubt that credit cards are essential to building a solid credit history that will last for years to come. But getting approved for a credit card is not always an easy process, especially for someone that has a very limited credit history or has never owned a credit card in the past.
A little forethought and some planning can go a long way in helping you get approved for a credit card. Before you go ahead to apply for the card you want, you need to consider the following 7 things.
1. Know Your Actual FICO Score
This is very important and cannot be ignored when applying for a credit card. Knowing your actual credit score or an estimate of it will go a long way. Most credit card companies will provide you with your credit score on each monthly statement, but if you don’t have a credit card, you can check your score for free at sites such as CreditKarma.com. Note that the free scores that you are going to get on these websites are only estimates, but from my experience they are nearly spot on.
More than just knowing your score, you also need to make sure that you understand what the score means and if it is high enough to help you get a credit card. If you do not know what a good credit score is, the following will help:
- 760 and above: Excellent
- 701 to 759: Good
- 651 to 700: Fair (national average)
- 500 and below: Poor
The higher your credit score, the higher your chances of approval for a card. So the question you need to be asking yourself right now is if your score is high enough. According to a study that was conducted by the Consumer Finance Protection Bureau in 2013, only 39.1% of people that applied for general purpose credit cards were approved. However, 58.7% of Americans that had prime credit scores that fall within the 660 and 720 range were approved. 85.5% of the people that applied for credit cards that year and had credit scores of 720 and above were approved.
Even though there are many other variables that you can use to find out whether your application for a credit card will be approved or denied, knowing your credit score is the best way to determine your chances. If you checked your credit score and found out that your credit score is not so good, you should start making some changes that will help improve it. For instance, paying your bills on time and paying off debt. It is imperative that you get that score up if you want to get approved for a card that offers great benefits
2. Get A Copy Of Your Credit Report
You can get your credit report absolutely free from the major credit reporting agencies (Transunion, Equifax and Experian) once every year. You just need to go to AnnualCreditReport.com and enter your information. Once you do that, you will be able to see all the information that is shared on your report. If the information is accurate, great! But if you find mistakes, make sure you fix them right away.
3. Make Your Monthly Payments on Time
Your payment history contributes a whopping 35% to your credit score, so making sure that your bills are paid in a timely manner each month is vital. If you pay your bills late or miss payments, you can end up destroying your credit score in a few short months.
4. Lower Your Credit Utilization
Credit utilization is another big factor in your credit score. Utilization in this case simply means the amount of money that you owe in relation to the credit limits that have been set for you. Using SOME of your available credit is ok, but using too much of it will hurt your score.
Experts usually recommend keeping credit utilization below 30%. For example, if you have a credit limit of $1,000, it is not a good idea to carry a balance that is over $300. After using up more than 30% of the overall credit limit, you will appear to be a risk to lenders, which causes your credit score to go down.
Getting your utilization below 30% will automatically give your credit score a nice bump.
5. Wait For The Right Offer
Don’t be anxious and apply for the first card you see. Instead, you should take your time and look for an offer that suits your needs. For example, if you are looking for a credit card to help you consolidate your debt, the best way to start your search will be to look at balance transfer credit cards that let you pay zero interest for a limited period of time.
If you are interested in earning rewards, there are so many amazing rewards credit cards that you can consider. They offer everything from airline miles to cash back. You can also find credit cards that have lucrative bonuses for signing up as long as you spend a particular amount on your card in the first 3 months after signing up.
6. Consider a Secured Card
If you can’t seem to qualify for a traditional credit card because your credit score is not high enough, a secured card may come in handy. This card offers credit that is tied to a cash deposit that you put down unlike an unsecured credit card that will extend you a line of credit.
For example, most secured credit cards have a $500 credit limit and require a deposit of $500 in order to get started. This may not look beneficial at first, but it is a great way to improve your credit score.
You need to use the secured credit card responsibly if you want your credit score to improve. Make sure you pay it off every month. When you do that, you will upgrade the card to an unsecured credit card and the deposit that you made will be given back to you.
7. Be Responsible and Have Patience
If your situation does not allow you to qualify for a credit card right now, you just need to give it some time. When you pay bills, students loans, car payments and other payments on time, you will be in the best position to boost your score in future. However, if you have a lot of debt, bills in default, and are in collections, you need to first focus on repairing that damage before you even think about getting a card.
Applying For The Card
Now that you have taken the steps to get your credit score as high as possible, it’s time to apply for the card. Applying for the card is a simple process that involves filling out an application form online. You will be required to provide details about your income and your personal information. If the credit card issuer is reputable, they will provide a response very quickly, sometimes even instantly.
Years ago, having a credit card was a luxury and was ONLY used for emergencies. Nowadays, things are different. There will come a time when you want to finance a car or buy a home, and having a good credit history as well as a solid credit score will be very important. The best way to build your credit history and credit score is through the use of credit cards. However, the easiest way to tank your credit score is also through the use of credit cards. Getting approved for a credit card when you have a limited credit history or poor credit is not always easy. Just follow the steps above to improve your credit score, and if you need to apply for a secured card to get started, there’s nothing wrong with that!