How to apply and get approved for a credit card

Credit cards can be an important weapon in your financial arsenal — when used responsibly. They come with plenty of benefits, including cash back, points and travel rewards. They can also guard you from identity theft and extend protections on your purchases — and they can help boost your credit score.

We’ll help you decide how to select the right credit card, apply for a credit card and increase your chances of being approved.

How credit cards work

Let’s start with the basics. When you use a credit card, you’re tapping into a line of credit from your credit card provider. You can use your credit card for everyday expenses, but we recommend only charging purchases that you can afford to pay off in full at the end of each month, so you don’t accumulate high interest charges.

Each credit card has a set billing cycle, typically around 30 days. After your billing cycle ends, you’ll have a grace period during which you can pay off your purchases without accruing interest. If you don’t pay the entire balance before the due date, all purchases from the previous billing cycle will begin accruing interest based on your annual percentage rate, or APR. Credit cards are notorious for carrying high APRs, so you’ll want to factor credit card payments into your budget to avoid racking up debt.

5 steps to follow before applying for a credit card

If you’re ready to apply for your next credit card, here are a few steps that can help.

1. Practice good credit habits

Before you apply for a credit card, you should understand and practice good credit habits. Maintaining good credit can increase your chances of getting approved for a credit card at a lower rate.

First, check your credit report before you apply to see if there are currently any derogatory marks. Those marks could prevent you from qualifying for a credit card. If you find negative marks, take steps to bring your credit score up, such as paying your bills on time each month and squaring up payments on any past-due or collections accounts.

Next, commit to using your credit card in a way that will help your credit, not hurt it. Ways you can do this include using less than 30% of your credit limit and paying off your bill in full each month.

2. Find the right card

Before applying for a credit card, be sure to research and find the right one for you. There are different card types to choose from, and it’s essential to know how each one benefits you.

First, pay attention to basic information such as the card’s interest rate, credit limit and fees. The better your credit, the better the rates and credit limits you’ll be eligible for.

Next, consider what benefits you most want from a credit card. The two most common credit card perks are cash back and travel rewards. If you travel regularly, then you’ll probably want to apply for a travel rewards card. But if you don’t travel often, then a cash-back card might be a better option. You can use your cash-back rewards to help pay for everyday expenses, pay down your bill or save up for a large purchase.

3. Look for preapproval offers

Preapproval offers are targeted, which means they’ve been picked for you based on your credit score. Simply put, applying for one of these cards may give you a better chance of qualifying.

Preapproval offers often offer special sign-up bonuses in the form of points, gift cards or cash-back rewards.

Although preapproval offers are targeted, they don’t guarantee approval. Once you apply, a hard inquiry is run on your credit. If a derogatory mark is found that doesn’t fit the lender’s criteria, you could be denied.

Lastly, don’t just apply for a card because you have a better chance of being approved — make sure it fits your financial goals and offers the rewards you’re looking to earn.

4. Be prepared for a credit hit

When you apply for a credit card, it appears as a hard inquiry on your credit report for two years. If you’re applying for more than one credit account, you might be worried about multiple hard inquiries. You can limit inquiries by applying for all new accounts within a 14-day window. Any accounts you apply for during this time will show up as one single hard inquiry, rather than multiple. A hard inquiry stays on your credit report for two years, but it can only negatively impact your score for up to a year, according to Experian.

That said, a new credit card can impact your score for other reasons. Opening a new credit card reduces your average age of credit, which can lower your credit score. The good news is that the negative impacts of a new credit card are likely to be temporary, while the positive effects can be long-term. A new credit card increases your total credit limit and reduces your credit utilization, an important factor in determining your score.

5. Have a repayment strategy

Before applying for a credit card, have a strategy in mind to avoid paying high interest charges since these can completely negate the financial benefits of the card.

The best strategy, of course, is to pay your card off in full on your due date each month. Enrolling in AutoPay is a good way to ensure you pay off your entire balance — or at least the minimum balance due on time every month.

What you’ll need to apply for a credit card

To determine if you qualify for a credit card, companies will look at your financial information and decide if you’re a good candidate. They’ll need your:

• Name
• Age
• Social Security number
• Employer
• Annual income

Using your Social Security number, the credit card company will run a hard inquiry to determine if your credit report and score qualify you for a card. They’ll also look at your debt-to-income ratio, which is the percentage of your monthly income that goes toward debt. You can calculate your DTI by dividing your monthly debt payments by your monthly pretax salary. The higher your DTI, the lower your chances of qualifying for a card.

Credit card applications are filled out primarily online today, but some companies still allow you to apply via mail or over the phone.

What to do if your application is declined

If your application is denied, the lender is required to provide you with the reasons why under the Equal Credit Opportunity Act. Once you know why, you can work on improving your credit, paying down debt and, when you’re ready, applying for a card that fits your credit profile.

Improve your chances of getting approved for a credit card

If you were denied a credit card or want to ensure that your chances of approval are higher, you should start by reviewing your credit report. Work on any derogatory marks, like late payments or accounts in collections right away. Use features like AutoPay to ensure your credit cards are paid on time every month.

For those with no credit history, you might consider becoming an authorized user on a responsible friend or family member’s credit card. This can help you quickly build credit so you can apply for your own card.

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