8 Tips for Applying for a New Credit Card

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October 12, 2022

8 Tips for Applying for a New Credit Card

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Perhaps you’ve seen the enticing offers on television or received a prequalification letter for a new credit card offer in the mail and now you’ve decided it’s time to add a new credit card to your wallet. Credit card companies do not guarantee approvals, but there are steps you can take before you submit your credit card application to increase your chances of approval. Let’s take a closer look at our best tips for applying for a new credit card.

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8 Tips for Applying for a New Credit Card

1. Review your credit report

One of the most critical credit card tips is to review your credit report regularly (at least quarterly), which is important for several reasons. For starters, it keeps you alerted to any changes in your credit profile, including possible fraudulent activity, mistakes, or erroneous information, plus the information supplied to the three credit bureaus regarding your use of credit. Your report is full of vital information for lenders, including:

Credit score: This overall number indicates to lenders how likely you are to pay back your credit obligations. You should note each of the three credit bureaus assigns a score plus you have a FICO score assigned to you. The FICO score is what is used by the majority of lenders.
Credit history: Lenders like to see a mix on your credit history, including auto and home loans and credit cards. The credit report will detail your credit history and show the types of loans, the year they were established, and your payment history for the last seven years with each of these loans.

As a consumer, you’re entitled to three free credit reports per year, which you can find at annualcreditreport.com. You do not have to sign up for any credit monitoring service to access this free information!

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2. Pay your current bills on time

Paying your current bills on time each month is an excellent way to strengthen your credit report and history. Your current mortgage, auto loan, credit cards, line of credit, or other loans are part of your report. You may even be able to add your utility payments too. If you struggle with keeping up with your monthly obligations, you can set up automatic payments for at least the minimum payment due—this will ensure you consistently pay your bills on time.

3. Monitor your credit utilization

Credit utilization rate is another major factor reviewed by creditors to determine your creditworthiness. Credit utilization refers to the amount of credit you’re extended versus the amount you use. Creditors like to see a credit utilization ratio of 30% or less. For example, if you have $2,000 in credit, ideally, you would have a balance of $600 or less. A lower number indicates your ability to handle credit responsibly, and you aren’t “maxing out” your credit cards.

4. Choose the right credit card to align with your credit score

There are a variety of credit cards available on the market, and each one has a credit score range the issuing bank is willing to accept. With a little research, you can identify which credit cards are marketed towards people with excellent or good credit or those who are building or rebuilding credit. By only applying for the credit card that most closely matches your current credit score, you give yourself a much better chance of approval.

Most credit card issuers are focused on three main categories with an application:

A stable income
Established credit history of at least one or two years
And a minimum credit score that falls within their credit score range criteria

While the exact ranges may vary depending on the credit scoring model used, you can expect the ranges to look something like this:

Poor: 300 to 579
Fair: 580 to 669
Good: 670 to 739
Very good: 740 to 799
Exceptional: 800 to 850

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5. Apply for a secured credit card if you have no credit history or are building credit

If you have no credit history or are rebuilding your history due to bad credit, a secured credit card option may be your best bet. A secured credit card requires you to put down a security deposit, and your credit limit will mirror this amount. Typically, after you make consecutive on-time payments for at least six months to a year and show your responsible usage, you can start applying for a traditional, unsecured credit card that doesn’t require a security deposit.

A secured credit card offers several advantages, including building credit, a refundable security deposit, and even earning rewards. But you should be aware of potential drawbacks too, which include higher fees and interest rates and a low credit limit compared to other credit card options. You should also confirm the credit card issuer reports your usage to the three credit bureaus.

6. Start applying sooner vs. later

If possible, it helps to establish credit when you’re younger—but not too young when you cannot grasp the responsibility of using a credit card. Credit card issuers consider credit history and the longer you establish your account, the easier your credit journey may be. This is why keeping your credit cards open, if possible, is important, even if the balances are paid off. The more credit accounts you have in good standing, the better your credit score will improve your approval odds.

7. Limit the number of credit card applications you submit

Each time you apply, your credit report will notate this as a “hard inquiry.” Hard inquiries are recorded when a lender reviews your credit report. These notations stay on your credit report for up to two years and can potentially lower your credit score by a few points. Although a minor hit, if you apply for too many credit cards, creditors will view this negatively, which could impact your approval. Try to space out applications at least six months apart if possible.

8. Choose a credit card based on your financial goals

There are a variety of credit cards available to suit your individual needs. While this won’t necessarily increase your approval odds, you should consider only applying for a card that meets your goal and offers you the most value. Ask yourself the following:

Do you need a first credit card or a chance to rebuild credit?
Are you a student looking for a student credit card?
Do you need the lowest interest rate for purchases or balance transfers?
Are you looking for one strictly for its rewards, such as a rewards credit card with cash back or points or a major sign-up bonus?
Do you need cardholder perks, such as travel assistance, purchase protection, and extended warranties?
Are you willing to pay an annual fee, or do you want a card without one (which often means fewer perks)?

Asking yourself these questions will help you navigate through the various credit card offers and find the best credit card for your financial situation.

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What to do if you’re not approved, but you have good credit

You may have good credit and still be denied approval. If this happens, you should focus on activities that help improve your credit score. In addition to the credit tips outlined above, you could:

Become an authorized user: If you have a family member or friend who is willing to add you as an authorized user to their credit card, it could help improve your credit score. This is a tremendous responsibility since both their credit and yours are on the line. If you do go this route, be sure the credit card company reports your information as an authorized user to the three credit bureaus since not all of them do.
Use a co-signer: If you apply for another credit card, you can add a co-signer, similar to having an authorized user. Their credit history and income will be factored in, and assuming they meet the requirements, too, it increases your odds of approval.
Establish a small line of credit: If you have an existing debit card or checking account with a bank, you could inquire about a small line of credit since you’re an existing customer. With responsible use, this could help improve your credit score too, without getting another credit card.

The bottom line

It pays to do your research before you apply for a credit card. Not only does this give you information about your financial situation, it also helps you understand how you are presented to creditors. Follow these tips for applying for a new credit card, which could increase your chances of approval.

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Sara Coleman is a former corporate gal turned creative entrepreneur. She began writing professionally several years ago and now contributes to multiple websites, blogs, and magazines. She’s also an avid reader and can’t resist a great historical fiction novel. Sara holds a BA in journalism from the University of Georgia and can be found supporting her Bulldogs every chance she has. She resides in Charlotte, North Carolina, with her wonderfully supportive husband and three children. When she’s not ushering her kids to sports and dance lessons, she can be found creating content for her own website, TheProperPen.com.

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