Credit cards offer one of the easiest and fastest ways to build a solid credit history that will last a lifetime. Applying for a credit card is as easy as it sounds, and only requires a bit of personal information to get started. But getting approved for a credit card? Not as easy as it sounds.
If you’ve ever struggled to get approved for a credit card, you’re not alone! If you’ve never had a credit line before or have an extremely limited credit history, it can be hard to find a bank that will give you a chance. Still, it is possible, and here are a few tips to help you get started!
1. Know Thy Credit Score
A credit score is a number between 300-850 that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. Your credit score is one of the most important factors in a credit card issuer’s decision to approve your loan application. Your credit history is based on the number of open accounts, total levels of debt, repayment history, and other factors. Lenders will use your credit history as a guide for future credit allowance.
2. Get Access to Your Credit Scores
Getting access to your credit scores is easy. You can request a free copy of your credit report from each of three major credit reporting companies––once a year, here. In addition, you’re entitled to see your credit report within 60 days of being denied credit. We recommend taking time to review each document for inaccuracies or inconsistencies.
If by chance, you spot an error, make sure to request a dispute from the agency within 30 days of receiving your report.
3. Improve Your Credit
The road to good credit can be a long and winding one. If you want to improve your credit, you’ll have to be patient and committed to making payments on time, keeping balances low on existing cards, and avoiding new debt. One of the most important tools to improve your credit is to pay attention to your credit utilization ratio––the balance divided by your credit limit. This balance should be below 30% on each credit card.
4. Don’t Apply for the First Credit Offer You See
If you have poor credit, you may not get approved for a card with a large sign-up bonus or additional rewards. In fact, carelessly applying for credit cards can actually put a huge dent in your credit score––be careful! Before you apply for another credit card, consider calling the card issuer to find out specific information about qualifications.
5. Include All Applicable Income in Your Credit Application
As mentioned before, issuers consider your credit scores as an indicator of creditworthiness, but scores don’t reflect your income. One way card issuers use income is to calculate your debt-to-income ratio, which helps determine how much you can afford in monthly payments.
If you make money outside of your full-time job, make sure to include it on your application.
6. Don’t Give Up!
Being denied a credit card can hurt––both your credit score and your sense of morale. But don’t give up! If you think you’ve done everything right and your application is still not approved, you can call the issuer and ask for reconsideration.
Moving forward, make sure to avoid applying for too many credit lines at once, and always make payments on time to avoid late fees and further dents in your credit.
For more money management tips, explore the Metro Community Development blog.