For tens of millions of Americans, credit cards are an invaluable tool. Not only can a credit card offer you one of the most secure and convenient methods of payment, but it can also be a great way to build your credit history and increase your credit scores when used responsibly.
|What You’ll Likely Need to Include to Apply for a Credit Card||What Lenders Usually Consider in a Credit Card Application|
|Personal Information (Name, SSN, Address, Phone Number)||Payment History (shown on your credit reports)|
|Financial Information||Credit Scores|
|Checking or Savings Account||Annual Household Income|
|Occupation and Employer Information||Monthly Housing Payment|
Credit Card Application Basics
When you apply for a credit card, you are requesting a line of credit that can be used to make purchases with your card. The charges you make are a loan from the card issuer to you. And like any loan, the lender will want to some indication that you will pay it back.
Your credit history (shown on your credit reports) and your credit scores are the primary ways that card issuers judge your creditworthiness. The better your credit history and credit scores, the more likely you are to be approved for a new credit card account.
Your credit history and credit scores will also determine the size of the line of credit you are given and may determine your account’s interest rate.
Choosing the Right Credit Card to Apply For
There are hundreds of credit cards available from dozens of credit card issuers, so choosing the right card may not be an easy task. To narrow it down, you should start with just the credit cards that you can apply for with your credit history and credit scores.
If you’re a first time credit card user, and you haven’t had credit problems in the past, then you’ll want to focus on the cards designed for those with fair or average credit. But if you’ve already built your credit history, then you can look at cards designed for those with a good or excellent credit history.
Next, you’ll want to examine all of the card’s features and benefits, as well as its rates and fees. Fortunately, every credit card application is required to display its terms and conditions in a standardized format, with no fine print, to make comparison easier. Key terms to look for include a card’s annual fee, standard interest rate, foreign transaction fees, and balance transfer fees.
You’ll also want to make sure you choose a credit card that matches your needs and spending habits.
[Editor’s Note: If you want to avoid hunting for a credit card altogether, you can sign up for a free Experian account and get matched with credit cards with the features you want and more importantly that you’re likely to qualify for based on your credit profile and spending habits.]
Filling Out the Credit Card Application
A credit card application will usually require the following information:
1. Personal Information
All credit card applications begin with personal information including your name, date of birth, and Social Security number. You’ll also need to provide your mailing address, email address and phone number so that the card issuer can contact you.
2. Financial Information
Typically, you can choose from options including employed, self-employed, retired, student and unemployed. It’s a common myth that you have to have a full-time job to be approved for a credit card.
In fact, all you have to do is show that you have sufficient household income to repay a loan, regardless of your employment status.
3. Total Annual Income
The next thing that the credit card application will ask for is your total annual income. You are able to include nearly all forms of income including alimony, child support, investment income, and government benefits, but you don’t have to include anything you don’t want to.
You can also include income from other household members, so long as you have a reasonable expectation of access to these funds to repay your loan. For example, a non-working spouse could include the income of a working spouse if he or she can use that income to make credit card payments.
4. Housing Costs, Bank Accounts, Authorized Users, Balance Transfers and Cash Advances
Most applications will also ask you for your rent or mortgage payment, in order to gauge your monthly expenses. Some credit card applications will ask if you have a checking or savings account, and how much you plan on spending on your credit card each month.
Finally, some applications will ask you if you would like to add any additional authorized cardholders, if you would like to transfer an existing balance, and if you would like blank checks to be used for cash advances.
Your answers to these questions aren’t likely to affect the status of your application, they will just allow the issuer to better serve you if the card is approved.
Submitting Your Credit Card Application
Once you’ve filled out the application as best you can, you’ll submit it for approval from the card issuer. In many cases, they may be able to instantly approve your new account, or you may be asked to wait for a decision to arrive in the mail.
Just because your application wasn’t immediately approved, you could still be approved eventually. And if your application is ultimately declined, the card issuer is required to provide a reason along with a copy of the credit report and credit score(s) they pulled.
It’s a good idea to review that credit report and the reasons your application was rejected in case there are errors or issues you weren’t aware of.
Finally, you can always contact the card issuer by phone and ask to have your application reconsidered, which will sometimes result in it being approved. By understanding how the application process works, you can take the steps necessary to be approved for your next credit card.
What You Should Do With Those Credit Card Offers You Get in the Mail
You probably get offers in the mail every day for various credit cards or loans. If you receive mail that says you’re pre-approved, you’ll still need to complete an application to accept the offer and finalize opening the account with the bank or financial institution.
It’s important to carefully review these offers before applying to ensure that have the features you’re looking for and you’re clear about any potential costs.
Before You Apply For a Credit Card
You’ll want to make sure you know where you stand when it comes to your credit reports and credit scores before submitting any credit card applications and think through how applying will impact you.
How to Check Your Credit Report and What to Look For
You can get your credit report from many sources, including Experian. You can also get one free credit report every 12 months from Experian, Equifax, and TransUnion at AnnualCreditReport.com.
[Editor’s Note: Sign up for a free Experian CreditWorks account and you’ll get a free Experian credit report.]
It’s important to review your credit reports before you attempt to open new credit accounts so that if there is anything that needs to be cleared up, you can address it.
Negative information in your credit report can drop your credit scores, and you want your credit scores to be the best they can be before applying for a credit card.
If you see incorrect information on one of your credit report, initiate a dispute at that credit reporting agency.
When it comes to your credit scores, you want to pay less attention to the number itself and more attention to the range your credit score falls in—since different credit scores have different scoring ranges—as well as the score factors that are impacting your score (paying on time, credit utilization, credit history, inquiries, and your mix of credit accounts).
What Credit Score Will You Need to Get Approved for a Credit Card?
The banks and credit card companies may have different approval criteria, but here is some general guidance.
|Type of Credit Card||FICO® Score Range||Credit Tier|
|Rewards cards, cash back cards||800 and higher||Exceptional|
|Cards with average APR, some rewards, and other perks||740-799||Very Good|
|Cards for those with bad credit. Retail store cards are an option.||670-739||Good|
|Cards for those with bad credit. Typically no rewards, high APR. Secured cards also an option.||580-669||Fair|
|Secured card is likely the best option||579 and lower||Poor|
Remember that applying for a credit card will impact your credit scores, as any new creditor or lender will pull a copy of your credit report (this is known as a hard inquiry).
The change in your scores will likely be minimal, but applying for too many cards will add up. That’s why researching options ahead of time or using a credit card matching tool like Experian’s is a good idea.