Despite what you may have heard, credit cards aren’t evil.
And if you want to build credit — which will help you qualify for a mortgage or a car loan in the future — credit cards are one of the best ways to get started.
But you shouldn’t just apply for cards willy-nilly. Here’s how to strategically (and, fingers crossed, successfully) apply for a credit card.
4 Steps to Apply for a Credit Card
1. Check Your Credit Scores and Reports
Contrary to common belief, you don’t have a single credit score: you have dozens. And they’ll determine which credit cards you qualify for.
Your credit scores are based on factors like whether you make your payments on time, how long your credit accounts have been open, and how much of your available credit you use.
They’re based on your credit reports from the three major credit bureaus — TransUnion, Equifax, and Experian — and they vary because each bureau has slightly different information about you.
The most common type of score is from FICO. Luckily, you don’t need to pay for access: here’s how to get your FICO scores for free.
While you’re at it, you should also check your credit reports by visiting AnnualCreditReport.com, which offers one free report per bureau per year, or by using issuer-provided services to monitor your credit reports for free. If you see any errors, contact the bureau (and wait until it corrects the mistake before applying for new credit).
2. Look for a Credit Card That Fits You
There’s no magic credit score that will get you a credit card, as each card has its own approval requirements.
But once you’re familiar with your credit profile, it’s easier to narrow the field and find the right card for you.
Credit cards are available from a range of banks (Citi, Capital One, Chase, Wells Fargo, etc.) and networks (Visa, American Express, Mastercard, and Discover).
There are also many different types of cards to choose from, including:
- Credit cards for people with limited or no credit history
- Cash-back credit cards, which offer cash rewards on your purchases
- Travel rewards cards, which earn you airline miles or points on your purchases
If you have a limited credit history, you might not qualify for a rewards credit card right away.
Instead, you can focus on building your credit with one of the credit cards from the “limited or no credit history” category. By using it responsibly, you’ll eventually be able to get whichever rewards card tickles your fancy.
In addition to the perks, you should compare the annual fees of the credit cards you’re considering. If you’re in the market for your first credit card, we recommend getting one without an annual fee. You’ll want to keep it open for a long time, ideally forever, without having to worry about getting enough value to justify the fee. (Remember: longer credit history = better credit scores.)
You can also take a look at interest rates. While lower interest is better, we recommend completely paying off your credit card’s balance each month. If you do that, you won’t pay any interest all on purchases, rendering the interest rates somewhat inconsequential.
Keep an eye out for “intro APRs,” which are interest rates that last for a certain time after you get a card. You might see, for example, that a card has 0% APR for the first year.
Introductory APRs can be helpful if you need to pay off a big purchase over several months. Or, if you have existing debt, you may want to do a balance transfer to reduce the amount of interest you’re paying each month. In either case, you should strive to totally pay off your debt before the intro APR period ends to avoid or reduce the amount of interest you’ll pay.
3. Check for Pre-Qualified Credit Card Offers
Once you’ve decided which cards might work for you, check with the issuers to see if you’re “pre-qualified” for any of them.
Here’s how this works:
- You’ll fill out your information on the credit card issuer’s website.
- It’ll run a “soft inquiry” into your credit.
- If the issuer thinks you’re a good fit for any of its credit cards, it’ll give you a pre-qualified credit card offer. Though this doesn’t guarantee you’ll get the card, it means you have a good shot.
- You can then apply for the credit card, and the issuer will run a “hard inquiry” before approving or denying your application.
Whereas soft inquiries don’t affect your credit, hard inquiries will cause a slight dip. Check for pre-qualified offers first so you’ll only apply for credit cards for which you have a decent chance of being approved. This will result in fewer hard inquiries on your credit reports (and therefore keep your scores as high as possible).
4. Apply for a Credit Card
Almost there! You’ve chosen the card that’s right for you, and are ready to fill out your credit card application.
Here’s how to complete the application process online:
- Click the “apply now” button for the card you want, whether on this website or the credit card issuer’s site.
- Provide basic information like your address, phone number, and Social Security number.
- When the form asks for your income, make sure you include everything you earn — even if it’s from multiple jobs or income sources. (Submit accurate information; while it may be tempting to exaggerate, it’s illegal.)
In many cases, the issuer will instantly approve or deny you when you submit your application. Some of the time, however, it’ll alert you by mail within a few weeks. If the issuer has additional questions about your application, someone may call you, then approve or deny you on the phone.
What If Your Credit Card Application Is Denied?
For most of us — regardless of whether we have “bad” or “good” credit — there will come a day when a credit card application is declined.
The first step you can take is to call up the credit card issuer’s “reconsideration line.” Just like it sounds, this customer service department will take a second look at your credit card application. If you have any negative or unusual entries on your credit reports, this can give you a chance to explain them.
You can also apply for a credit card from your local bank or credit union. If you have a good relationship with the institution, it might be more willing to work with you.
No luck? Don’t start haphazardly applying for new cards, as that will just ding your credit further. The best thing to do is work on building credit.
Here are a few ways to make yourself a more attractive borrower:
- Improve your debt-to-income ratio: If you have a significant amount of debt, use the snowball or avalanche method to pay off as much as you can. And try to increase your income by asking for a raise, working a side job, or switching careers.
- Consider a secured card: Unlike normal credit cards (also called unsecured credit cards), secured credit cards require a security deposit of anywhere from $49 to $10,000, which then serves as your credit limit. Your payments will be reported to the credit bureaus, helping you develop a credit history.
- Look into credit builder loans: These are a special type of installment loan designed to report positive payment activities to credit bureaus and help you build credit.
Just remember: building good credit doesn’t happen overnight. It takes time, diligence, and self-control.
Use Your Credit Card Responsibly
When you finally get that piece of plastic in your hands, it might feel like the hard work is over — but in reality, it’s just begun. It’s now time to use your credit card responsibly.
As we mentioned earlier, we recommend only spending what you can pay off in full each month to avoid all interest charges. Then you’ll be able to take advantage of your card’s rewards and credit-building ability without paying an extra cent!
Even if your new card doesn’t offer a lot of rewards, spending responsibly will allow you to build your credit and, eventually, choose from any of the best credit cards on the market.
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