A credit card is considered a financially liberating tool in the 21st century, and for all the right reasons. So, the question lingers; why wouldn’t you want to apply for a new credit card?
Besides being the most widely accepted payment model, it also offers interest-free cash withdrawals (for a certain period), exciting redeemable reward points, insurance coverage, fantastic discounts and offers, cashback, etc. Well, if you have listed enough reasons in your head all ready to go for a credit card right away, then welcome to this article and take away some interesting insights regarding new credit card applications and approval.
If you’re new to applying for credit or you’re attempting to rebuild credit history, there are some crucial aspects that you would need to look into.
Why is it important to know the process of approval?
Getting a credit card involves a relatively straightforward process:
|Credit Score Range|| Approval Rate
● Choose a trusted bank or financial services, provider
● Select the right card according to your convenience
● Submit the required documents
● Get involved in the verification process
● Wait for your card to arrive
However, certain things make your credit card approval journey hassle-free and smooth. You need to understand what it takes for a credit card to get approved finally. Only when you know the process and obstacles will you be better prepared to tackle them! You can narrow it down to your shortlisted credit cards based on your likelihood of getting approved. It has some significant benefits like:
● It would save you valuable time.
● It would make sure that you get through the process of getting a credit card smoothly.
● It would ensure that you don’t lose your credit score because banks carry out an inquiry to check your credit score during the verification process, which causes your score to dip a little.
Main hurdles to be aware of!
Before jumping onto the application process, you should gain some information regarding your chances of approval. It would help if you didn’t ignore that rejection would lead to a dip in your credit score. Banks and other institutions take into consideration of following factors before issuing a credit card:
● credit score and credit report
● the monthly mortgage, rent, and other financial commitments
Let’s further discuss some of the crucial factors for your convenience:
Credit Score and Credit Report:
This is the most significant factor that decides your fate of getting credit card approval. If you want to measure your odds of getting a card approved, the best but not the ultimate way to know is to look for your credit score and credit report from a trusted and eminent credit bureau.
According to a report of the Consumer Financial Protection Bureau, a strong link between credit scores and approval rates has been found:
● Super-Prime denotes a score of 740 and above
● Prime shows a score between 680 to 739
● Near-Prime means a score between 620 to 679
● Sub-Prime represents a score between 580 to 619
● ”no credit” refers to a score below 580
The above table indicates the importance of a good credit score. Be informed that your credit score is far more vital than just getting credit card approval. It also influences the annual percentage to be levied on your card.
There are specific steps that you can take into consideration for a better credit score and credit report, assuming that you are looking to make some amends for your previous financial mistakes:
● Be punctual with your monthly credit card payments. You can set up alerts through banks and billers, or you can initiate automatic payments by various methods to avoid delays in bill payments.
● Always keep your credit utilization ratio under check. According to reports, a credit utilization number under 30% draws the excellent attention of the lenders.
● Pay off your current outstanding amounts, thereby improving your utilization ratio.
● You can also request a credit limit increase to improve the utilization ratio, provided that you wouldn’t make any new purchases against the higher limit.
Monthly Rent or Mortgage:
How much you pay as rent or mortgage decides the type of card you would be eligible for. It also indirectly affects your credit score.
Minimum salary for a credit card:
The consensus is that those with very high incomes only get credit cards. But it is not entirely true. For example, in India, even people with an annual income of less than 2 lakh rupees are provided with credit cards by some NBFCs. But obviously, the credit limit will be directly proportional to your income.
Beginners applying for a new credit card need to be fully aware of the aforementioned things to experience an excellent maiden voyage into this cashless journey.
Veterans need to maintain a good credit report and other stuff mentioned above before going for another application.