Having access to credit is essential today, whether it’s for emergency expenses, building credit history, or taking advantage of rewards and benefits offered by credit card companies.
Credit card approval can be an intimidating process, especially if you have bad credit or limited credit history.
However, with the right knowledge and preparation, you can increase your chances of getting approved for a credit card.
- Different credit cards have different interest rates and requirements.
- Universal factors such as credit score and income are important to get approved.
- Proper management of credit card debt can help ensure approval for future credit card applications.
For most credit card applications, the issuer will consider your credit score, income, and existing debt.
By optimizing these factors, you can improve your chances of getting approved. From simple actions like reviewing your credit report (through a soft check) to more strategic moves such as applying for the right card, there are several steps you can take to increase your chances of getting approved for a credit card.
Before we begin, some requirements are needed such as age. Otherwise, a cosigner will be needed if under the age requirement.
Depending on the credit card itself, other factors such as salary or registered business income may also be considered. Each individual credit card issuer has its own set of criteria, so it’s important to do your research and choose the best option for you.
Stacking The Factors In Your Favor
As mentioned, credit card issuers typically consider three factors when evaluating an application: credit score, income, and existing debt. By understanding how each of these elements contributes to the approval process, you can take steps to improve your chances.
1. Credit Score
Your credit score is a numerical representation of your creditworthiness and financial behavior. It’s calculated based on your payment history, credit utilization, length of credit history, types of credit used, and new credit. Most lenders use the FICO score model to determine your credit score.
To increase your chances of getting approved for a credit card, you’ll want to aim for a good or excellent credit score (typically above 670). You can achieve this by paying all your bills on time, keeping your credit utilization low, and maintaining a good mix of credit.
Before applying for a credit card, it’s essential to review your credit report and fix any errors or negative items that may be dragging down your score. You can request a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once every 12 months. If you spot any mistakes, you can dispute them with the credit bureaus to have them removed.
If your credit score is already low, to improve it, you can become an authorized user on someone else’s credit card with a good payment history or consider a secured credit card, which requires a cash deposit as collateral.
Credit card issuers want to know that you have a stable income and are capable of repaying your debt. Most will require proof of income, such as pay stubs or tax returns, before approving an application.
Having a steady source of income can also help you qualify for higher credit limits and better rewards. If your current job doesn’t pay enough to make you a desirable candidate for a credit card, consider picking up a side hustle or part-time job to increase your income.
3. Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is the percentage of your monthly income that goes toward paying off debt. A high DTI ratio can be a red flag to credit card issuers, as it shows that you may have difficulty managing your current debts.
To calculate your DTI ratio, divide your total monthly debt payments (credit cards, loans, mortgages, etc.) by your gross monthly income (income before taxes and deductions). Ideally, your DTI ratio should be below 36%. If it’s higher, consider paying down some of your debts before applying for a credit card.
How To Manage Credit Card Debt
The main reason why many people fail to be approved for a credit card later on in life is due to managing their credit card debt poorly.
If you’re constantly maxing out your credit limit or missing payments, it will reflect negatively on your credit score, making it harder for you to get approved for a new credit card. This is why it’s important to have a strategic plan in place when using and managing your credit cards.
These options can help you pay off your credit card debt faster and potentially improve your credit score in the process.
The process of debt consolidation can be as simple as these six steps:
- Step 1 – Take note of your credit card debt and interest rates
- Step 2 – Look into potential debt consolidation options (such as a personal loan or balance transfer credit card)
- Step 3 – Use a debt consolidation calculator to determine how much you can save
- Step 4 – Apply for the chosen debt consolidation option
- Step 5 – Pay off your remaining credit card balances with the new loan or transfer
- Step 6 – Create a payment plan to pay off the new loan or balance transfer within a specific timeframe
By lumping together your credit card debt into one loan or balance transfer, you can simplify the repayment process and potentially save money on interest.
For example, if you have two credit cards with a 25% and 20% interest rate, consolidating them into one loan with a lower interest rate of 15% can save you money in the long run.
Paying off more than the minimum balance can also improve your credit score.
When it comes to managing your credit cards, it’s important to pay off more than just the minimum balance each month.
This shows lenders that you are a responsible borrower and can handle larger debt amounts. Ideally, you should aim to pay off your full balance each month to avoid interest charges altogether.
In addition to making larger payments, it’s important to also make your payments on time. This accounts for 35% of your credit score and can have a significant impact on improving or damaging your credit score.
At Americor, we understand the importance of managing your finances wisely.
As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.
If high-interest debts are impacting your savings, investments, and financial well-being, explore our debt relief solutions, including debt settlement and debt consolidation, to regain control of your financial future.
If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.
By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future.
Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.
For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!