Applying for a credit card? Your odds for approval
Acceptance depends on the issuer, the card and your credit score
If you're in the market for a credit card, you probably are
wondering whether you will be approved for the card once you apply.
While the answer depends largely on your credit score, it gets a bit more complicated, because approval rates also vary by type of card and by individual card issuers' appetite for new customers. Whether you are an established credit card holder or
just starting out, we're going to walk you through how to determine if that new
credit card you are eyeing can actually be yours.
the seasoned cardholder:
Know your score, know your odds
If you already have a card or two, know your credit
score and what's on your credit report, good job. Here's the most important
thing you need to know before applying: The better your credit score, the
better your chances of getting approved for a new line of credit.
Consumers who hold "prime" FICO credit
scores (660-719) have a 58.7 percent approval rate for general purpose credit
cards, according to the Consumer Financial Protection Bureau's Credit Card
Practices Inquiry survey.
It's even better for tthose who have achieved "superprime" FICO scores (greater than 720) have an
85.5 percent chance of approval.
Overall, consumers have average approval rate of
39.1 percent, but since that encompasses all scores, it's much more important
to focus on where your score lands on the scale and what that represents in
terms of your credit health and approval odds.
If your odds look good, apply. If not, see what you
can do to raise your score before filing that credit card application.
Remember, good credit can also translate into lower
interests rates and higher spending limits so if you find your score to be
"subprime" (659 or lower), consider waiting to apply until you improve
your credit to not only increase your approval odds but also get the best
terms. Subprime consumers were approved at only a 17.1 percent rate in the CFPB survey.
Even if you have great credit, you can still be
turned down. Don't be shocked or insulted. If that happens, to paraphrase the
dating cliche, it's not you, it's them. Card issuers turn on and turn off
offers all the time, and expand or trim their portfolio of cardholders to fit
the credit newbie:
a deeper dive into the details
If you're new to credit, or just need a refresher, use
the following steps to see yourself from a credit lenders perspective and
translate that knowledge into a successful credit application. :
your credit report and score
Understanding your credit report is the key to
understanding how lenders will judge your credit worthiness, according to Steven
Axtell, a certified financial professional with credit counseling agency American
"People should review all information in their
reports," he said. "Are there judgments or collection accounts
showing? Repossessions or mortgage foreclosures? Is the consumer carrying more than 25-30
percent of their credit limit as a balance?"
Your credit report is the basis for your credit
score, which is the most influential factor in a credit card approval process, so
examining the report will show you what's driving your score.
If something doesn't look right on your report, file a dispute right away. Credit report errors and fraudulent
information may negatively impact your credit score and lower your chances for
credit card application approval.
Once understand your report, purchase your FICO
credit score, as this standard score is used in 90 percent of U.S. lending
decisions and a good measure of your credit approval odds, according to MyFico.com.
Your FICO score will fall within a 300-850 range. The higher the number,
the better your credit and the more likely you are to be approved for a new
line of credit.
Credit card applicants with a higher annual income
or more assets tend to be looked more favorably upon by lenders. Why? Because
they are more capable of repaying whatever credit they spend.
However, you don't have to make a six-figure income
to get approved for a credit card, you just have to prove you can reasonably
The Consumer Financial Protection Bureau, as instructed by the 2009 Credit Card Accountability Responsibility Disclosure Act, issued a regulation in requires
that lenders consider the applicant's ability to make the required payments. When
you submit your credit card application, your income will be weighed against
existing debts and other financial obligations to help determine if you can
handle another potential source of debt.
This qualifying factor may be especially relevant
for young adults, as the CARD Act also requires that credit applicants under 21
have co-signers, unless they can prove that they have a high enough income or
to justify a line of credit.
So, regardless of your age, if you are not able to
prove that you have some type of income that could be used to pay off any
accumulated credit card debt, you may want to pause before submitting your
credit card application and wait until you are more financially prepared.
an appropriate target
You have a better chance of getting approved for a
credit card that fits your credit profile and financial situation, so research the
cards before you apply.
"For example, find something that has a credit
score acceptance range that fits your score," said Apprisen credit
counseling spokeswoman Jana Castanon. "The more knowledge you can get upfront,
the better decisions you are going to make in the end."
Understanding who you are as a consumer will also
help you select the right card. If you have a low credit score or are a
student, focus on the credit cards that cater to those consumer groups for
greater odds of approval.
"The bottom line is that if the consumer
applies for the right card, he or she stands a greater likelihood of
approval," said Gail Cunningham, Vice President of Public Relations for
the National Foundation for Credit Counseling.
Once you've found the right card, consider applying
for that card with a lender you trust...and trusts you.
"Any lender will tell you that it is all about
the relationship building," Castanon said. "If you have a good
relationship with a certain financial institution, like you've established auto
loan and maintained non-overdrawn accounts with them, they will want to
maintain that good relationship and not lose you."
[F]ind something that has a credit
score acceptance range that fits your score.
|-- Jana Castanon
Apprisen credit counseling
If you've never had a credit card before, go to the
bank that holds your checking account and meet with a banker. That previous
connection alone may help give them the confidence they need to give you a line
of credit and even open doors to lower interest rates or fees if you are approved.
By this point you've done all the research and
estimating you can. It's time to fill out and submit that credit card
And for now, just that one.
Every time you apply for a new line of credit the
issuing financial institutions does what is called a "hard inquiry"
for your credit information. To many credit applications in a short amount of
time can be a red flag to lenders, according to Axtell.
"If someone has applied for more than two
credit cards in the last 12 months, it may look riskier to the lender and cause
their credit score to decrease," he said. "One client of mine was
trying so hard to establish credit that he applied for 14 accounts in less than three months, not understanding that this was causing serious harm to his creditworthiness."
Again, you can determine if this type of scenario is
working against you by reviewing your credit score and report. If you find that
recent credit inquiries have taken a toll on your credit score, consider
waiting a couple of months before applying for another card to increase your
likelihood for approval.
luck? Don't give up
If you've gone through the steps and believe you are
not likely to be approved for a new credit card, or have already been denied,
strengthening your current credit profile. While it may be tempting to just
apply for a different card, that won't help you in the long
"It would be best to work on improving the
current situation by paying down balances and resolving negative items on your
report rather than applying for more credit," Axtell said.
You can do this on your own or with help from
"A lot of financial institutions have credit-building
products that can be a good tool to help you get started," Castanon said.
Talk to your private bank or find a financial counselor through associations
such as the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies to learn about your options.
Building good credit
takes time, so don't be discouraged by short-term obstacles. Consider all
influencing factors and stay on top of your credit score and report. You'll be
holding a new card in no time.
See related: Switching to a new card from the same bank,
How many is too many credit cards?, Cards with free credit scores
Published: April 29, 2014
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