How Do I Get a Credit Card? Applying and Getting Approved

Introduction

Applying for a credit card is relatively easy these days, but many factors go into determining whether you’re approved and how much credit you receive. Being prepared before you apply can improve your chances of getting the card that best fits your needs.

Credit Card Requirements

In the United States, you need to be at least 18 years old to open a credit card account. However, in many cases, simply being 18 is not enough. In order to be approved, applicants have to prove that they’re able to make payments. Otherwise, many credit card companies require applicants to be 21 years old or have a co-signer who is over 21 — and most issuers no longer offer the co-signer option.

What To Consider Before You Apply for a Credit Card

With credit card offers continually arriving in the mail and plenty of digital promotions popping up in email inboxes, a lot of consumers may assume that applying for a credit card isn’t a big deal. You might even be thinking that when you see a worthwhile interest rate, rewards, or even a cash back offer, you should just go for it.

But the truth is that having a credit card account is a serious financial responsibility, just like any other type of financing.

So before you apply, ask yourself these questions:

• What are your reasons for getting the new card? Consider your needs at the time, whether you want to build or rebuild your credit, or use the card for rewards and other benefits.

• Is your credit good enough to get approved? If you have a low credit score, you may not fit the card’s profile. Or if you’ve applied for other lines of credit recently, that can lower your credit score or send the message to potential lenders that you’re desperate for credit. In either case, it may be harder to qualify for a credit card.

You should also consider how much you can afford to purchase with the card each month so you can consistently pay off the balance. The problem with making only the minimum payments each month is that you’ll end up paying interest charges on your purchases. Worse yet, if you don’t even pay the minimum, you’ll likely face late fees and your credit score could be negatively affected.

How To Enhance Approval Chances

The best way to improve your chances of getting approved for a credit card is to make sure your credit is in good standing and you don’t have any red flags in your history before applying.

Generally, the following information impacts whether a card issuer will qualify you.

• Credit utilization ratio: You want this ratio to be as low as possible — typically under 30%. Using too much available credit could increase the perceived risk you pose to a credit card issuer.

• Hard inquiries: If you’ve completed full applications for multiple cards or loans recently, this may signal to credit issuers that you are trying to get more credit than you can support. A hard inquiry can also lower your credit score by several points.

• Account age and number of accounts: Staying on top of your credit card accounts and other loans for a number of years indicates that you’re capable of managing your finances responsibly — and the longer the better. Having only a few accounts or a short credit history (a few months or only a couple of years) may signal to potential lenders that you’re a higher risk.

• Delinquencies: Not paying your bills on time is a big red flag that typically impacts your credit score. And it opens up the concern that you may not meet your obligation to repay a credit card issuer for purchases made with their card.

• Loan variety: Having a mortgage or another type of long-standing installment loan demonstrates that you have experience with more than just credit cards. It shows lenders that you can plan ahead and know what you’re doing when it comes to your budget and personal finances.

Co-signing with someone who has established credit used to be an effective method for applicants without their own solid credit history. And you may still find this option through small local banks or credit unions, but major credit card issuers don’t usually allow it anymore.

Types of Credit Card Approval

When you receive credit card offers, or start shopping for cards online, you’ll notice two common terms: “pre-approved” and “pre-qualified.” Both indicate that you’ve been pre-screened and look like a potentially good candidate for the card. Essentially, these terms mean you’re likely to be approved, but there’s no guarantee.

What is a pre-qualified offer?

An invitation to be pre-qualified means a lender has asked you to start the application process through a soft inquiry to determine if you meet their financial approval criteria. But since pre-qualification needs you to start the soft inquiry process, you’re usually more likely to come across this term when you’re actively looking at cards and see an option to “see if you pre-qualify.”

The card issuer then uses your submitted information to provide either a decline or a possible interest rate and credit line that could fit your financial situation. But they still have to look more in-depth (with a hard inquiry) in order to make a final decision.

What is a pre-approved offer?

A pre-approved credit card offer means the credit issuer already ran a soft inquiry, and you met certain financial approval criteria, but further review is warranted. So they reached out to you, and if you then accept the offer by submitting an application, they’ll make a hard credit inquiry to evaluate your credit history.

Keep in mind that in both cases, if you apply, you won’t necessarily receive the credit card. Especially if your credit score has gone down because of a late payment or a higher credit utilization ratio that took place after the issuer made the soft inquiry on your credit. In other words, if your credit score has decreased, or you’re using more credit than before, you may no longer qualify.

You don’t need to be concerned about receiving pre-qualified or pre-approved offers or submitting a pre-qualification form yourself. These soft inquiries will not reduce your credit score in any way, and they’re invisible on your credit reports to everyone but you.

Does Pre-Approval Affect Your Credit Score?

It’s only after you respond to a pre-qualified or pre-approved offer with a full credit card application that the issuer makes a hard inquiry. When this happens, the inquiry will officially show up on your credit report, and your credit score may be impacted slightly.

Keep in mind that when you sign and submit a credit card application, you’re effectively agreeing to the terms and conditions in the contract. These terms should include fees, interest rates, rewards, and other details, so make sure you read them carefully before you complete the application.

Do Your Research and Compare Credit Card Offers

Once you decide you’re ready to apply for a credit card, it’s a good idea to shop around and compare cards. Your goal should be to find cards that you’re likely to qualify for based on your credit score. Once you’ve identified a few options, then look for the ones that offer the best benefits, like points or cash back rewards for making purchases, and other features, such as travel protection. Identify one or two that will work with your financial situation, goals, and lifestyle.

Once you’re approved, you can start using your card to build or rebuild your credit. With on-time payments and responsible card usage, you’ll hopefully be on your way to a higher credit score and all the benefits and perks that come with good credit.