If you’re checking out your options online, in search of a new credit card but you have no credit, or you have bad credit, then you’re probably wondering “will I qualify for a credit card?” This answer can largely depend on your credit rating, but it can also be a little more complicated considering approval rates tend to vary with different card issuers and can depend on the type of credit card you’re applying for.
Whether you’re just starting out or you’re an established card holder, we’ll guide you through how you can determine if qualifying for a new card is even a possibility.
Knowing the Odds
If you’ve had a card in the past and you know what’s on your credit report and what your score is, then you’re on the right path. Obviously, if you have decent or great credit, you’ll have a great shot at getting approved for a new card.
People who have a high credit score beginning at six hundred and sixty will have a fifty-eight percent approval rating for most general-purpose cards. The odds are even better for people with a rating of seven hundred and twenty or more.
On average, most Americans have a credit approval rating of thirty-nine percent, but considering that rating encompasses all scores, it’s important for you to focus on where your score falls on the scale and what it can represent when it comes to your approval odds and credit health. If you think the odds look good, apply. But if you have a lower than average rating you need to determine what you can do to raise your score before you decide to fill out that credit card application.
You should keep in mind that good credit often translates to a higher spending limit and a lower interest rate. So, if your score falls below six hundred and fifty-nine, we recommend waiting to apply for a new card until you raise your score, in order to get the best terms.
However, you can still be turned down, even if you have great credit. Credit card companies frequently turn applicants down all the time and tend to trim or expand their cardholder’s portfolio in order to fit their needs, so don’t be insulted.
If you have bad credit or you’re new to credit, try the following steps in order to view your application from a credit lender’s point of view:
First, find out what your credit score is. The easiest way to do this is to look at your credit report. This will give you a better understanding of how a lender will judge your application.
Review all of the information in your report. Are collection accounts or judgments showing up? Mortgage foreclosures or repossessions? Are you carrying more than twenty-five percent of your credit limit as a balance? The basis of your credit score is your credit report. Your score is the most influential factor in the approval process, so viewing your credit report can help you learn what exactly is driving your score.
If you’ve noticed that something doesn’t look right to you on your report, make sure you file a dispute immediately. Fraudulent information and credit report errors can negatively impact your score, lowering your chances of getting approved for a new card.
Purchase your FICO credit score once you understand your report. The FICO credit score is the standard score that’s used in over ninety percent of lending decisions.
The FICO score falls within a three hundred to eight hundred and fifty range. Obviously, a higher number equals better credit.
Average Income Requirements
More assets or a higher income will improve your chances of getting approved for a new card because it gives credit lenders the impression that you can afford to repay whatever you charge on your card.
You don’t have to make hundreds of thousands of dollars a year in order to get approved by a credit lender, you just need to show that you’re capable of paying off your cards.
Once you have submitted your card application, the credit lender will use your income and weigh it against any existing debt you have, in addition to other financial obligations, in order to determine if you’re financially able to handle another source of debt.
Choosing the Right Card
If the card you choose fits your financial situation you’ll have a better chance of getting approved, so make sure you do your research before you apply.
If you’re a student or you have a low credit score, you should focus on a card that caters to those consumer groups, so you can increase your odds of approval.
It’s Time to Apply
After you’ve done all the estimating and research you can, it’s now time to fill out that credit card application and submit it. When you apply for a new card, a creditor will perform what is called a hard inquiry, in order to view your credit report. It can be a major red flag to lenders if you submit too many applications in a short period of time. If you apply for more than three cards in one year, it can make you look too risky and can cause your credit score to dip. If you apply for a card and get turned down, wait at least sixty-days before you apply for another one. This will increase your chances of approval.
Never Give Up
If you’ve determined that you aren’t likely to get approved for a new card after you’ve gone through all of these steps, or you’ve just been denied, your next step is to focus on improving your current credit profile. It will be tempting to just apply for a new card, but in the long run, that won’t help you.
It’s best to improve your current credit situation by resolving any accounts in collections on your report and paying down balances instead of just applying for more credit.
So, why use a credit card if it’s so damaging to your credit? It’s not actually. A credit card will only damage your credit if you make late payments or fail to pay altogether. There are many instances in which getting a new credit card can boost your credit rating and can even help to repair your credit.
For more information on how you can clean up your credit, click here.