When I was younger, I applied for a first credit card. Notice I didn’t say I applied for a first right credit card.
I didn’t know any better. I just accepted the first credit card for which I successfully applied. It happened to be a Wells Fargo card because there was a Wells Fargo branch in my local grocery store.
Getting that card was a mistake.
I wish I would’ve taken a bit more time and applied for the right credit card for me. Don’t make this same mistake. We’ll help you learn how to apply for a credit card, including finding the right credit card for you.
Know Your Credit Score
Before applying for a credit card, you’ll want to know your credit score. Two credit scoring models exist, FICO and VantageScore. These models study your financial history and assign you a score between 300 (worst) and 850 (best). Average scores are around 700.
Payment history and the percentage of your credit limit you’re currently using are key components of both FICO and VantageScore.
Credit reporting services, such as Experian, Equifax, and TransUnion, add the score to your credit report which banks and other organizations can check.
Knowing your credit score will give you a better idea which cards will accept you.
How to Check Your Credit Score for Free
If you’d like to know your credit score before you apply for a credit card, multiple sources are available for free.
Some options for receiving a free credit score include:
- Your bank: Your local bank where you have an account may check your credit score for you for free.
- Credit card issuer: Some credit card companies will print your credit score on the monthly statement, or they will check your credit score if you make a request. I now have several cards with Chase which also gives me access to my score.
- Equifax: If you visit the Equifax website, you’re allowed to create an account and receive your credit score for free.
- Experian: You can see your credit score for free at the Experian website or by using the Experian app.
- Free annual credit report: If you sign up at the Annual Credit Report website, you can receive a free copy of your credit report, which contains your credit score. You may receive a report from each of the three credit reporting companies once per year.
What Credit Card Issuers Are Looking For to Approve You
Your credit score has a massive impact on whether you get approved for a given card. The better the card, the better the score that you’ll need.
To improve your score, you’ll need a credit report that shows flawless payments on all your loans (including credit cards) for years on end.
But other factors also play a role in determining whether a credit card issuer will approve your application.
- Delinquencies: If you have reports of delinquencies on your credit history, your chances of receiving a new credit card will drop. Late payments count as a delinquency, as do missed payments. These delinquencies can remain part of your credit history for several years.
- New account requests: Each time a creditor checks your credit history because you’ve applied for credit, it counts as a hard inquiry that stays on your account for a couple of years. With too many hard inquiries on your account, a creditor may see you as a risk, believing you may be trying to open too many accounts. Each time you apply for a credit card, even if you receive a denial, it counts as a hard inquiry.
- Debt-to-income ratio: The credit card issuer will attempt to calculate your debt-to-income ratio. If you have too much debt, the issuer may deny your request.
- Credit limit usage: The issuer will calculate how much of your credit limit you’re actually utilizing across all of your credit accounts. If you’re utilizing less than 30 percent of your total credit limit, you’ll have a better chance to receive approval for a new credit card.
Understand The Different Types of Credit Cards
There’s several different types of cards that you’ll be able to choose from. Here are the primary types:
Rewards Credit Cards
A rewards type of credit card allows users to earn free benefits or other perks over time. Rewards cards calculate what you can receive by the amount of money you charge to the account. Subsets of rewards credit cards include:
- Points: A points card gives users the ability to receive points which they can redeem for flights, hotel rooms, Amazon purchases, and other rewards.
- Travel: Not only does a travel credit card usually give points or miles for free travel, it also might have special perks for traveling.
- Cash back: You get a small percentage back on every purchase, usually 1-2%.
Cards for Building Credit
Some credit cards market themselves toward college students, people who haven’t built up a credit profile yet, or folks with previous credit problems. Some of these types of credit cards include:
- No perks: A credit card aimed at someone who’s trying to build his or her credit likely will not have rewards or perks associated with it.
- Student: Some banks are willing to extend college students a special type of credit card as a first card. This may be a low credit limit card.
- Secured: A secured credit card requires a deposit to receive it. If you end up being unable to pay back the card, the bank will keep your deposit.
- Poor credit: For people with a poor credit score, a bank may have a special type of card to help them rebuild their credit. However, these cards often have very high interest rates and very low credit limits.
Specialized Credit Cards
Some cards will have specialized features that differ a bit from a standard credit card.
- Business: A business credit card has specific features aimed at business users, such as extra perks or high credit limits. Using a business card is a good way to keep track of expenses you may have in a side business.
- Balance transfer: These cards are designed for folks with high interest rates on another card and then want to transfer that balance to a card with a lower interest rate. I don’t recommend looking at these cards, you need to get in the habit of paying off your cards in full every month.
- Low interest: Some cards provide you with a lower than average interest rate, which is beneficial for those who carry a balance. Again, don’t spend much time with these. Focus on getting yourself to the point that you can pay cards off in full every month.
- Charge card: A charge card is one that the user must pay off within each statement period. You can’t carry a balance like a normal credit card. Some people prefer the charge card because they have no temptation to run up the balance.
Figure Out The Best Credit Card For You
Looking for the right credit card boils down to finding a card that matches your spending habits and your current financial situation. Here are some tips for applying for just the right credit card for you.
Find the Best Card for Which You Qualify
Based on your credit score, you’ll receive approval for some cards. But other banks may deny your application.
Don’t worry if you don’t qualify for the exact card you want. Use the card for which you qualify responsibly for a couple of years, and your credit score should rise so you can receive the card you really want.
Look for a Card That Has the Perks You Want
If you’re a big fan of travel, look for a travel card that provides perks that match how you like to travel.
Or if you prefer a simple credit card that you don’t have to think about using, maybe a cash back card is up your alley.
Avoid Picking Up Too Many Cards
Those new to credit card usage should stick with one card until they have built up their credit scores. After a couple of years, you can expand your collection to two or three cards.
Don’t apply for several cards at one time, just to try to receive a large number of sign-up perks, or you could end up with more cards than you need. You’ll end up creating confusion for yourself with too many cards, trying to remember what steps to take to receive various rewards. And you’ll place multiple hard inquiries on your credit report which lowers your score.
Apply Online – Here’s What to Expect
Now for the easy part, which is the actual application.
Just visit the website for the credit card for which you want to apply. Fill in the information in the form and hit the submit button.
The majority of credit card applications require less than five minutes to complete, and you should receive an answer about approval or denial within a couple of minutes.
Some of the information you must provides includes:
- Full name
- Date of birth
- Mailing address
- Telephone number
- Email address
- Estimated annual income
- Common monthly expenses
- Balance of checking and savings accounts
- Social Security number
Credit Cards Help You Get Rich
Having a credit card, putting your day-to-day spending on it, and then paying it off in full every month is the easiest way to build up your credit score.
The higher your credit score, the lower the interest rate that you’ll have when you apply for a mortgage or a car loan. A lower interest will save you tens of thousands of dollars over the life of your mortgage.
And a good rewards card basically gets you a 1-2% discount on everything you purchase for life. Plus some sweet perks when traveling.
You can get all that for free.