Applying for a credit card these days is as simple as entering your information into an online form and clicking “submit.” But getting approved for a credit card requires pre-emptive planning that should start long before you apply.
#1 Know your credit score
Your credit score is one of the most important factors in a credit card issuer’s decision to approve your application.
Most rewards credit cards require good or excellent credit. So if you’ve struggled to maintain a good credit history, it may be worth it to put off applying until you can get your finances in top order.
You can do this by making payments on time, keeping your balances low on existing credit cards and avoiding new debt.
#2 Reduce your debt
A full 30% of your credit score is determined by how much you owe. High credit card balances can be especially damaging.
Your credit utilization ratio — your balance divided by your credit limit — should be below 30% on each credit card. So if, for example, you have a credit limit of $10,000, it’s recommended to keep the balance below $3,000 at all times.
You can lower your credit utilization by creating a plan to pay down an existing balance as quickly as possible. Additionally, consider paying off purchases more than once a month to keep your balance lower throughout the month.
#3 Don’t apply for the first offer you see
If you don’t have good credit, you may find it difficult to get approved for a card with a large sign-up bonus and a lucrative reward structure.
Each credit card application ends up on your credit report, call the card issuer and ask about a specific card’s requirements.
#4 Include all of your income in the application
Your credit score is a good indicator of your overall creditworthiness, but it doesn’t show lenders one important thing: your income.
Credit card issuers need your income level to calculate your debt-to-income ratio, which helps determine your ability to make payments. There are two ways to lower this ratio: increase income or decrease debt.
If you earn money outside your full-time job, include it on your application so that an accurate debt-to-income ratio will be reflected. However, resist the temptation to overstate your income.
If an issuer finds that you knowingly provided false information on your application, you could be charged with credit card fraud, which is punishable by up to $1 million in fines and/or 30 years of imprisonment.
#5 Pay down balances before your statement cycle closes
Few people realize that your credit card’s statement balance is reported to the credit bureaus as debt, even if you ultimately avoid interest charges by paying off each balance in full.
If you are using your credit cards heavily and applying for a new card, you should actually pay off your entire statement balance before your statement cycle closes, so that your statement has little, if any balance.
#6 Don’t give up
If you think you’ve done everything right and your application is still denied, don’t move on just yet. Credit card issuers have reconsideration lines you can call to plead your case.
Have a plan before you call. You have the right to ask the issuer why you were denied, and you can also check your free credit report to see if there are any blemishes on your history.
Formulate a convincing argument as to why you want the card and why you are fiscally responsible. Above all, be polite. Customer service agents are much more likely to respond positively if you have a pleasant demeanour.
Being denied for a credit card hurts — both psychologically and in terms of the effect on your credit score. That’s why it’s essential to take stock of your credit situation before you apply for your next card.
Also, make sure to give accurate information during the application process and be prepared to make a case for yourself in the event you aren’t approved immediately.
Were these tips helpful? Feel free to share them with your friends and check out these top 13 loan mistakes that you should avoid in 2017 and learn how to get real about personal loans.