Applying for a credit card is relatively easy these days, but there are a lot of factors that go into determining whether you qualify and, if you do, how much credit you qualify for. To maximize your chances of getting the right credit card, it helps to be prepared before you apply.
With credit card offers continually arriving in the mail, and plenty of digital promotions popping up in email inboxes, a lot of consumers assume that applying for a credit card is no big deal. You may be thinking that when you see a worthwhile interest rate, rewards, or even a cashback offer, you can just go for it, right?
The truth is that having a credit card account is a serious financial responsibility, and in fact, it is just like any other type of financing. So before you apply, make sure you ask yourself these questions:
The best way to get a credit card is to make sure your credit is in good standing and you don’t have any red flags before applying. Generally, credit issuers will look at the following information to determine if you qualify:
Once you decide you are ready to apply, it’s time to start comparing cards. Your goal should be to find cards that are likely to approve you based on your credit score. Once you’ve identified a few options, then look for cards that will let you maximize rewards with travel benefits, points back for making everyday purchases, and other features, such as travel protection. Identify one or two that will work with your financial situation, goals, and lifestyle.
When you receive offers, you’ll notice these say you are either “pre-approved” or “pre-qualified.” These terms indicate that you are conditionally approved, or qualified, for a credit card offer. These terms essentially mean you’re likely to be approved, but there’s no guarantee.
An invitation to be pre-qualified means a lender has asked you to start the application process in order to determine if you meet their financial-approval criteria from a soft inquiry. The card issuer uses this information to provide an interest rate and credit line that fits your financial situation, but they would have to look more in-depth (with a hard inquiry) in order to make a final decision.
On the other hand, a pre-approved credit card offer means the credit issuer already ran a soft inquiry, and you met certain financial approval criteria, but further review is warranted. Hence, they reached out to you, and if you accept the offer, they will make a hard credit inquiry to evaluate your credit history.
Keep in mind that in both cases, if you apply, you won’t necessarily receive the credit card. Especially if your credit score has gone down because of a late payment or a higher credit utilization ratio that took place after the issuer made the soft inquiry on your credit. In other words, if your credit score has decreased, or you are using more credit than before, you may no longer qualify.
Don't worry, you don’t need to be concerned about receiving pre-qualified or pre-approved offers. These soft inquiries will not reduce your credit score like a hard inquiry might.
It is only after you respond to a pre-qualified or pre-approved offer with a full credit card application, that the issuer makes a hard inquiry. When this happens, the inquiry will show up on your credit report. So keep in mind that when you sign and submit a credit card application, you are effectively agreeing to the terms and conditions in the contract. These terms should include fees, interest rates, rewards, and other details, so make sure you read them carefully before you submit your application.
Once you are approved, it’s time to start using your card so you can successfully build or rebuild your credit. With on-time payments and responsible card usage, you’ll hopefully be on your way to a higher credit score and all the benefits and perks that come with good credit.