It hurts when a credit card company rejects your application. If you’re planning to apply for a credit card in 2018, then use the following tips to get your application approved.
1. Mention your income:
Credit score is important since it indicates how good you’re as a consumer. But it doesn’t tell the whole story. Your credit score doesn’t tell the potential creditors about your income.
Credit card company needs to know about your affordability and debt-to-income ratio. Like mortgage, most credit card issuers won’t be ready to issue a credit card in your name if you have a high debt-to-income ratio.
You can reduce debt-to-income ratio in 2 ways:
- Get a hike and increase your income
- Pay off your debts
Try to keep your debt-to-income ratio below 36% and credit-utilization ratio below 30%.
Tips to reduce your debt-to-income ratio
- Increase your monthly payment amount. Make extra payments if possible.
- Stop incurring fresh debt. Charge less on your credit cards.
- Postpone your large purchases.
- Save more and use cash for your purchases.
- Recalculate your debt-to-income ratio. Track your progress.
2. Get a co-signer:
Mention the name of co-signer on your credit card application if you have bad credit. Many credit card companies will reject your application if you have a bad credit score. In that case, you have 3 options:
(i) Rebuild your credit and then apply for a credit card
(ii) Apply for a secured credit card
(iii) Get a co-signer who has a good credit score
The co-signer will be responsible for credit card payments. If you fail to make monthly payments, the co-signer has to make payments. Try to find out a co-signer who has a good credit score.
3. Apply where you bank:
There is a good chance of getting an approval if you submit your credit card application at the bank where you have a savings or checking account.
4. Submit relevant documents:
Submit supporting documents with your credit card application. The documents you need to submit along with your application are:
- Copies of your paystubs
- W2 statements of the last 2 years
- Copies of your last 2 years’ tax returns
- Bank account statements (last 3 months)
- Security accounts
- You address of the last 2 years
- Social Security Number
- A document to prove that you were a full-time student in the last 2 years
Some banks like J P Morgan Chase may want to know how many types of debts you have. For instance: auto loan, student loan, mortgage, credit card accounts, etc. So you may have to provide these documents too.
5. Avoid applying in the holiday season:
As per the result of the Adobe Digital Index’s State of Banking, when the number of credit card applications increase, the approval rate falls. Credit card companies have lots of options. Why should they approve the credit card application of someone who has a bad credit score?
Credit card issuers are flooded with applications during the holiday season. People want to take advantage of sign-up bonus for covering shopping expenses. According to the Consumer Credit Card Market report, the number of applications for retail store cards can be 60% higher than the first quarter of any year. So if you genuinely need a new credit card, apply for it in the first 9 months of the year. January, February, and March are the most favorable months of the year.
6. Give accurate information:
Fill out the credit card application completely. Give accurate information about your physical address, date of birth, income, age, employment, etc. on your credit card application. Don’t give any wrong information on your credit card application since if the credit card company finds out the truth, they’ll reject it instantly.
There is yet another disadvantage of giving wrong information on your credit card application. Suppose you lie about your income and bloat your income on your credit card application. Even if the credit card company overlooks the copy of your pay stub, then also you can be in big trouble. You could get a credit card with a larger credit limit than you can manage. So it’s wise, to be honest and get what you deserve.
7. Try desktop credit applications:
Don't congratulate yourself if you know how to apply for a credit card. Usually, there are 3 ways to apply for a credit card and these are:
- Mail your credit card application
- Apply online
- Use smartphone application
Although the last option may seem to be the most convenient way to apply for a credit card, yet I would suggest you to try desktop credit applications. A recent survey by Adobe Digital Index’s State of Banking reveals that desktop credit applications are 77% more likely to be approved than smartphone applications.
Sit in front of your desktop and submit your credit card application online. You’ll have a greater chance of being approved.
Last few words,
Don’t apply for too many credit cards within 6 months since it doesn’t look good to lenders. They feel that you’re applying everywhere since your credit is poor. You’re not confident about qualifying for a credit card. So it is best to apply for credit cards at least 6 months apart.
Research, find out the right credit card for yourself, and then apply for it. Don’t jump on the first credit card offer you see. Use a free online tool to pick the right credit card. Nerdwallet has one such tool. You can try that.