Credit cards can offer convenience for spending, along with the potential to earn valuable rewards or to enjoy travel benefits. Before you apply for a credit card, it's helpful to research what it takes to get approved, and knowing what credit card companies are looking for can come in handy when you're completing your application.
Qualifying for a Credit Card
When credit card companies issue credit cards, it's with the agreement that you'll repay what you charge. Your credit history, including both credit scores and credit reports, tells credit card companies how likely you are to keep up with your financial obligations.
A good credit history suggests you're responsible when it comes to paying back what you borrow, and also paying on time. A poor credit history, on the other hand, may hint at the opposite.
As a rule of thumb, the better your credit history, the more likely you are to be approved for a credit card. Your card's interest rate is also tied to your credit rating and the credit limit you're granted. A higher credit score can result in a lower interest rate and a bigger credit line.
The 2009 CARD Act requires you to be at least 21 to apply for a credit card unless you're at least 18 and have proof of income.
Comparing Credit Card Options
Shopping around can help you find the credit card that's best suited to both your spending needs and habits, as well as your credit profile.
When evaluating cards, start with the features and benefits. Specifically, ask yourself what you're looking for from a card. If that's rewards, for example, you'll need to go a step further and decide what type of rewards you want to earn (i.e. cash back, travel miles, or points).
Next, compare the interest rates you'll pay for purchases, balance transfers, or cash advances with the card. If a card offers a 0% introductory promotional rate on purchases or balance transfers, consider how long the promotional period lasts and what the regular variable interest rate reverts to.
Always look closely at fees. The most prominent fees to consider include the annual fee, if any; the balance transfer fee if you're planning to transfer a balance; and the foreign transaction fee if you’re planning to travel overseas.
Once you have an idea of what type of card you're looking for, consider how likely you are to qualify for it, based on your credit history. Credit card companies usually don't specify a minimum credit score that's needed to qualify, but they may indicate which cards are designed for fair credit, good credit, or excellent credit. If you've checked your credit score, you can use that as a guide for choosing a card.
How To Apply for a Credit Card
There are multiple ways to complete a credit card application: online, using a paper application, or by phone.
Applying for a credit card online is convenient and you can get a decision almost immediately. Whether you apply online, by phone, or by mail with a paper form, the information you'll need to supply is the same.
First, you'll need to tell the credit card company a little about yourself. The application will likely ask for:
- Your name
- Date of birth
- Social Security number
- Physical address and email address
- Phone number
- Mother's maiden name
This information is used to verify your identity and make sure the credit card company has a way to contact you.
Next, you'll be asked about your annual household income. This is your gross annual income. You'll also need to tell the credit card company where this income comes from (i.e. employment, self-employment, or unemployment benefits). You may have the option to choose "Other" if your income doesn't come from any of those sources. For example, if you receive alimony, child support, disability benefits, or veterans' benefits, all of that could be used as income sources for a credit card application.
Housing Costs and Status
Credit card issuers are also curious about what you spend on housing each month and whether you rent or own. There may be a section on the application where you indicate whether you rent or own, how much you pay for rent or mortgage payments each month, and how long you've lived there.
If you'd like to add an authorized user to your account, you may have the opportunity to do that when you apply for a credit card. To add an authorized user, you'll need to fill in their name, address, and date of birth.
Once you've completed these fields on the application, you can submit it to the credit card company. Again, if you're doing this online, you should be able to get a decision within a minute or two. If you're mailing in an application, it could take several weeks to get a response.
Each new application for credit results in a hard inquiry on your credit report, which can trim a few points off your credit score.
What If You Apply for a Credit Card and Are Denied?
If you are not able to get approved for a credit card on your first try, credit card companies are required to notify you in writing for the reasons when denying credit. When explaining a denial, you're also entitled to know which credit bureau supplied the credit report that was used in the decision. You can then reach out to that credit bureau to get a free copy of your credit report.
Once you get your report, review it carefully to look for any errors or inaccuracies that could negatively affect your credit. If the denial is due to negative but accurate credit remarks, or you don't have a lengthy credit history, you could ask the credit card company to reconsider. If they deny your request, the next best thing you can do is focus on improving your credit to raise your odds of approval the next time you apply for a card.