How to Increase your Chances of Being Approved for a New Credit Card
It doesn’t matter if you are asking someone out on a date, looking for a job or applying for a credit card. No one likes being rejected. But when you apply for your next credit card, there are several things that you can do to help increase your chances of approval.
There’s an old saying that banks only want to lend money to people who don’t need it. Put another way, a bank isn’t interested in loaning money to someone who’s already in debt. And as far as a credit card issuer knows, you could open a new account and quickly max out your line of credit.
Before you apply for your next credit card, you should make every effort to reduce the amount of debt on your credit reports. This includes paying off long term debt on your credit cards, but it also means paying off any balances that are reported to the credit bureaus when your statement closes. Even if you plan on avoiding interest charges by paying off your entire statement balance, until they are paid off each statement balance will still be reported to the credit bureaus as long-term debt.
Therefore, you can reduce the appearance of debt by paying off your balance before your statement closes. No matter how you pay down your credit card balances, you must wait until after your next statement closes for your new, lower balance to be reported to the credit bureaus. And when paying down your credit card debt, you’ll want to pay particular attention to any accounts that you have with the same card issuer you are seeking a new account with.
Apply for the Right Credit Cards
Just like you won’t have much luck applying for jobs that you aren’t qualified for, don’t expect to be approved for a credit card that requires a much better credit history than you actually have. Before choosing a credit card, obtain a copy of your credit score and make sure the card that you’re applying for is designed for applications with your credit profile.
For example, most premium rewards cards require applicants to have excellent credit, while there are some basic reward cards that only require good credit. Some very simple, non-rewards cards are available to people with fair or average credit or those with a limited credit history. But if you have poor or bad credit, then you’ll either have to apply for a subprime card or a secured credit card.
Secured credit cards work much like any other credit card, but they require the payment of a refundable security deposit before your account can be opened. And thankfully, most applicants will be approved for a secured card so long as they can prove their identity and they don’t have a pending bankruptcy.
Fill Out the Application Properly
Credit card applications aren’t too difficult, but there are a few areas that some people misunderstand. The most important piece of information that you will provide on your application is your income. Just remember that you are allowed to cite not just your employment income, but any other form of income that you can use to repay a loan. This can include child support, alimony, Social Security benefits, and even dividends from retirement savings and investments.
Furthermore, the Consumer Financial Protection Bureau (CFPB) has issued an amendment to the CARD Act clarifying that non-working spouses or domestic partners can use the income from their spouse or domestic partner to apply for their own credit card account. The only rule is that you have to be 21 years old and have a reasonable expectation of access to your spouse’s income for the purpose of repaying a loan.
Follow Up on Your Application
When you apply for a credit card online, you may receive an immediate decision, or it may come in a letter that you receive in the mail. If your application is ultimately rejected, you can still ask the card issuer to reconsider it. Just contact the card issuer to ask them to take another look at your application. You can take this opportunity to update your application with new information, such as additional sources of income that you failed to include on the original application.
If you are applying for a new credit card from a card issuer where you already have multiple accounts, you can also offer to close an existing account or transfer some of your line of credit from another account. This allows the bank to approve your new account without increasing its exposure to default.
There are several things that you can do to increase your chances of being approved for your next credit card. By understanding how to minimize your debt, report your income more accurately and follow up on your application, you can avoid the disappointment of being declined for a credit card account.
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Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.