Whether you’re a seasoned credit cardholder or you’re applying for a credit card for the first time, you need to carefully consider what card you should apply for and how to increase the likelihood of getting approved for that credit card. Across the board, credit card applicants have an approval rate of around 40%. Your odds of credit card approval are largely based on your credit score, among other factors. Because each of us has a different credit score, your likelihood of credit card approval could be higher or lower.
Not all credit cards are created equal; they have different purposes. There are rewards cards, travel cards, balance transfer cards, and more. Each appeals to customers who have varying needs and credit profiles, and some types of cards may be easier to qualify for than others. Below are six tips that could help improve the likelihood of credit card approval.
Review Your Credit Report
Your credit score is based on your credit report, which outlines all your debt, such as credit cards, home mortgages, and student loans. Request a copy of your credit report from each of the three major credit reporting agencies. You can also go to AnnualCreditReport.com, which is a federally approved site, and get a copy of your credit history for free one time per year.
Go over your credit history carefully before you apply for a credit card. Credit card companies will typically look at factors such as:
- Late payments
- Number of accounts
- Derogatory marks
- The average age of your open accounts
- Number of hard credit inquiries
- Credit card utilization
- Credit mix or account mix: Revolving credit, such as credit cards, and installment loans, including auto, mortgage, and student loans
Make sure there are no errors in your credit history. When a credit card company looks at your credit report, you want everything to be accurate. Look for any foreclosures or bankruptcies, along with any judgments or collection accounts. If there is an error in your credit history, file a dispute with the company immediately.
Obtain Your Credit Score
After reviewing your credit history, take a look at your credit score. FICO is the industry standard for credit scores and is used by 90% of lenders. Your credit score can have a major impact on your odds of credit card approval.
The Consumer Finance Protection Bureau published a study about the likelihood of credit card approval based on credit score. According to the findings, applicants with a superprime FICO score above 720 were approved about 80% of the time. If you had a prime FICO score of 660 to 719, your odds of approval were roughly 60%. Applicants with a subprime FICO score of 619 or lower were approved less than 20% of the time.
Of course, your chances of approval are based on several factors, not just your credit score. But your creditworthiness is a major component of your application, and improving your score could be useful. Many companies, including most major banks and budgeting apps, offer free estimates of your credit score. But for the most accurate information, you can purchase your credit score through FICO.
Minimize Your Debt
You should have as little debt as possible on your credit history when applying for a credit card to increase your odds of approval. Even if you make all your debt payments on time, too much debt can lower your credit. High debt is often a red flag for lenders, who may worry that you’re overextended and therefore more likely to miss payments or default on what you owe.
You should also pay attention to your credit utilization. This refers to the amount of credit you use each month. For example, say you have two credit cards, each with a $5,000 credit limit. This means you have access to $10,000 in credit each month. But if you routinely charge high amounts to these cards, that could hurt your credit, even if you pay off the credit cards on time each month.
Instead, it’s often recommended that you carry a balance that is 30% or less of your credit limit. In the $10,000 credit limit example above, that would mean charging less than $3,000 to your credit cards each month.
State All Your Income
Most credit card companies ask for annual net income on a credit card application. The income requirement is important to the credit card company because it indicates your ability to meet your monthly debt obligations. A higher income could lead to better approval odds or a higher credit limit on your card.
Of course, you should list your net salary or hourly wages, but you should also include secondary sources of income, if applicable. You can usually include investment income, spousal support, retirement distributions, monetary gifts, royalty income, and any other earnings you receive to make it obvious that you can pay your debts. You may be asked to produce pay stubs and other documentation to prove your claims of income.
Choose an Appropriate Card
Consider what you’re looking for in a credit card, and make sure the type of card you apply for fits your credit profile. For example, if you are a college student working part-time at a minimum-wage job, you might struggle to get approved for a high-end travel card. Instead, a student credit card or other starter card would likely be easier to qualify for, though it would likely come with fewer perks.
Read through all the credit card application material, and be sure that your credit score matches their requirements, along with your income level. The closer your profile matches the credit card requirements, the more likely you will be approved.
Take It Slow
Don’t just grab every credit card application you can find and send them in. When you submit an application, it typically triggers a hard credit check. Too many hard credit checks can actually lower your credit, which in turn could hurt your chances of approval. Be strategic about which cards you’d like to apply for, and submit applications only for cards you’re truly interested in.
Improve the Likelihood of Credit Card Approval
If you are not approved for a credit card right away, don’t give up. You can raise the odds of getting approved for a credit card by increasing your credit score and building up your credit history, along with your annual net income. If you can’t get approved today, continue to work on building healthy credit habits and try again in a few months.
