Having good credit is vital for everything from taking out loans to buying a home, and getting a credit card is an excellent way to improve and maintain your credit. Applying for a credit card, however, can sometimes be overwhelming. Let’s take a deeper dive into some of the things you should be aware of before you apply for a credit card.
Information You’ll Need Before You Apply For A Credit Card
Your application is much more likely to be approved if you’ve already collected the information you’ll need to share. Although every credit card application will be slightly different, there are certain things that you’re always likely to be asked. Some details, such as your name, address, and phone number, will be easy — but there is some information that you’ll probably need to collect ahead of time. Of particular interest will be information regarding your income. You will need to be able to report:
- Any sources of income that you have
- Your total annual income
- All of your financial assets
Financial assets you may need to report can include certificate of deposits, liquid assets such as stocks and bonds, and tangible assets such as your home or car.
1. Know Your Credit Before You Apply For a Credit Card
Before you apply for a credit card, it is important for you to check your current credit score. There are many reputable places, such as Credit Karma and Nerd Wallet, where you can check your score for free. Knowing your credit score is incredibly helpful when you begin trying to apply for a credit card, because it can give you an advanced idea of which credit cards you’re eligible to apply for — if you have a better credit score you’ll be able to apply for cards with higher spending limits and more perks; a lower score means you should apply for more basic credit cards.
If you’re just starting out and have no credit at all — or if you’re having trouble getting a credit card for other reasons — you might consider applying for a secured credit card. With these cards, you can put down a cash deposit before you begin spending. If you consistently make your payments and build your credit, you will quickly become eligible for an unsecured card.
2. Don’t Apply for Too Many at Once
Although it may be tempting to send out many applications at once, try to limit yourself. A flood of applications — or multiple rejections — have a negative impact on your credit score. Instead of blindly sending out applications, you should specifically look for cards that you know you qualify for based on your credit history and income.
3. Apply For a Credit Card you Pre-qualify For
If you’re unsure where you can safely apply, try seeing if you’re pre-qualified for any credit cards. Although being pre-qualified does not guarantee acceptance, it does mean that you have approximately an 80 percent chance of your application being approved. If you are pre-qualified, it means the credit card company has looked at your credit history and decided you are an eligible candidate; if the rest of your information, such as your income, meets their requirements, you are likely to be approved for credit cards that you pre-qualify for.
Some major companies, such as Capital One and Bank of America, allow you to check online to see if you are pre-qualified. Other companies might send you notifications in the mail, which you can respond to either online or by post.
4. Use a Comparison Website
Given the number of credit cards out there, it can be overwhelming to choose which one is best for your needs. There are three things you should consider before applying for a credit card:
- Do you need to build your credit?
- Do you want to avoid interest?
- Do you want perks such as cash back?
Your current credit score will influence your answers to these questions. Once you have a sense for what type of card you’re eligible for and what your needs are, using a credit card comparison website can be incredibly helpful in finding the card that perfectly suits your needs.
5. Learn the Terminology
Familiarizing yourself with the language of credit cards before you apply is an excellent way to ensure that your application process goes smoothly and you don’t wind up with any surprises. Some terms you may come across frequently are:
- APR: This stands for Annual Percentage Rate, and most frequently refers to the interest rate that you incur when you make purchases. APR can either be fixed, meaning that it will rarely change, or variable, meaning that it will change over time.
- Minimum interest charge:If you don’t pay off your credit card in full every month, the minimum interest charge tells you the smallest amount you could owe in interest. You can avoid these charges by making sure your balance is paid at the end of every month.
- Transaction fee: This is an additional fee that you may be charged for various types of spending; for example, certain credit cards may charge a transaction fee if you spend money overseas.
Check your Credit Score
There’s a lot to keep in mind before you apply for a credit card. Luckily, as long as you’re prepared and you’ve done your research, you can make sure you’re getting the card that’s best for you based on your credit score.