We all know that credit cards offer one of the easiest ways to build a solid credit history that will last a lifetime. Still, getting approved for a credit card isn’t always as easy as it sounds.
If you’ve never had a credit card before or have a severely limited credit history, it can be difficult to find a bank that will give you a shot. And if you have bad credit or a poor credit history, your chances of being approved for the credit card you want may be even worse.
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Seven Steps to Getting Approved for a Credit Card
But with some planning and a little forethought, you can drastically improve your chances of getting approved. Before you apply, read these tips and consider a few of these moves:
1. Know your credit score.
Before you apply for a new credit card, it helps tremendously to know your actual FICO score – or at least get an estimate of it. If you don’t have a credit card at all, websites like CreditKarma and CreditSesame will let you view an estimate of your credit score for free. While the “free scores” you get through these sites are only estimates, they can give you a good idea of where you stand.
Some credit cards also offer their cardholders a free look at their FICO score on their monthly statements. If you have a credit card already, you can check to see if your card offers this benefit.
Knowing your credit score or an estimate of it is one thing — but you also need to know what your score means and whether it’s high enough to qualify you for a credit card. We recently looked at what constitutes a good credit score, and, according to credit expert John Ulzheimer, here’s how credit score ranges tend to stack up from top to bottom:
- A credit score of 760 or higher is considered excellent credit.
- A score between 701 and 759 is considered good credit.
- A score of 651 to 700 is considered fair credit (695 is the national average).
- Under 650 is considered poor credit.
The higher your credit score, the more likely you are to get approved for a credit card. So is your score high enough? In 2013, only 39.1% of all applicants were approved for general purpose credit cards, according to a study by the Consumer Finance Protection Bureau. However, 58.7% of Americans with “prime” credit scores — those in the 660 to 720 range — were approved, and 85.5% of applicants with “superprime” credit scores (720 or above) were approved.
There are other variables that may determine whether you’re ultimately approved for a credit card or denied, but once you know your credit score you’ll have a better sense of your chances. And if your score is on the lower end of that spectrum, you’ll know it’s time to make some changes — paying down balances and paying bills on time — to get that number moving in the right direction before applying for a credit card.
2. Check your actual credit report for free.
In addition to your credit score, it can be helpful to get a copy of your actual credit report. Fortunately, you can get a free copy of your credit report from all three major credit reporting agencies – Experian, Equifax, and TransUnion – for free, once per year.
All it takes is a visit to AnnualCreditReport.com to get a copy of your credit report for free. Simply visit the website and enter all of your information, and you’ll soon see all of the information shared on your report.
If everything reported there is accurate, you have nothing to worry about. If you find a mistake, however, you should do what you can to have it fixed right away. If you spot a mistake, here’s a post on how to dispute credit report errors.
3. Make all of your monthly payments on time.
If you take a close look at how your FICO score is determined, you’ll notice that the biggest factor playing into your credit score is your payment history. In fact, your payment history makes up a whopping 35% of your credit score.
If you need to improve your credit before applying for a rewards credit card — or simply want to keep it in perfect shape for the long haul — paying all of your bills on time is the best and easiest way to do it. Conversely, missing a payment or paying your bills late can wreak havoc on your credit score in a hurry. You should avoid making late payments on any of your bills if you can.
4. Pay down your debts.
Another big factor in your credit score is your credit utilization. This term, utilization, is used to describe how much money you owe in relation to your credit limits. While utilizing some of your available credit is generally a good thing, running up too many large balances is frowned upon and reflects negatively on your credit score.
Most experts suggest keeping your credit utilization below 30% — meaning, if your credit limit is $1,000, you shouldn’t carry a balance larger than $300. When you’ve used up more than 30% of your overall credit limit, it makes you appear riskier to lenders and can cause your credit score to drop.
When you pay off debt and get your utilization below 30%, on the other hand, your credit score will have the best chance to surge — and it does so right away. So if your credit score is borderline, pay down any outstanding balances before applying for a credit card to give yourself the best chance of getting approved.
5. Search for the right credit card offer.
While you might be anxious to get any type of credit card, it’s important to take some time to search for the best offer and find one that suits your needs.
If you want a credit card to consolidate your debt, for example, you can start by looking at balance transfer credit cards that will let you pay zero interest for a limited time. If you’d rather earn rewards, there are dozens of great rewards credit cards to consider that offer everything from cash back to airline miles. What’s more, some cards offer lucrative signup bonuses if you spend a certain amount on your card in the first three or four months.
Once you find a card that seems like a good match for your spending habits, applying is as simple as filling out an application online, including your personal information and details about your income. Most credit card issuers will give you a response in minutes.
Just remember that the best credit cards and offers generally go to those with good or excellent credit. If your credit needs some work, you might need to consider a different type of credit card to get started.
6. Consider a secured credit card as your last resort.
If your credit score isn’t high enough to qualify you for a traditional credit card, you should consider a secured credit card to get the ball rolling. Unlike unsecured credit cards that actually extend you a line of credit, secured cards offer credit that is tied to a cash deposit you put down.
For example, many secured credit cards offer a $500 credit limit but require a $500 deposit to get started. While this may not seem beneficial at first, secured credit cards are often the only way for people with bad credit or no credit to raise their credit score.
Once you begin using your secured card responsibly, paying it off each month, your credit score will improve, and you’ll typically be able to upgrade your card to an unsecured credit card and get your deposit back. If your credit score improves dramatically, you may even be able to qualify for a top rewards credit card after a stretch using a secured card. It really depends on your situation, your goals, and how much your score improves.
- Related: Best Secured Credit Cards
7. Use credit wisely and never give up.
If you aren’t able to qualify for a credit card right now, the best thing you can do is give yourself some time. By using the credit you do have responsibly — paying utilities, car payments, and student loan bills on time, every time — you’ll put yourself in the best position to boost your score over time. And if you have bills in default, a lot of debt, or other negative marks on your credit report, you should focus on repairing that damage before you take on more credit anyway.
Pay all of your bills on time, refuse new debts and pay down old ones, and monitor small changes in your credit report for signs of progress. Over time, your score will inevitably rise as long as you treat it with the respect it deserves.
The Bottom Line
Having a credit card is hardly a luxury these days. If you want to rent a car or a hotel room, for example, you’ll usually need one in your wallet. And if you ever want to buy a home or finance a car, you’ll need a good credit history and a solid credit score standing in your corner.
Still, it’s not always easy to get approved when you have poor credit or a limited credit history. The best thing you can do now is to take a step back and look at your credit for what it really is. And with the steps listed here, you can be on your way to a better credit score in less time than you think.