What Are Your Odds of Getting Approved for a Credit Card?

Your chance of getting approved for a credit card depends on several factors, including your credit score and the type of card you’re applying for. 

This article will help you understand what factors are taken into consideration when you apply for a credit card and what to do to improve your chances of credit card approval. In addition, we’ll also discuss what to do if you are denied.

What Factors Influence Your Approval for a Credit Card?

Whether you are applying for a business credit card through a credit card company or for a personal card through a bank or credit union, they will use various criteria to determine approval or rejection.

Credit Score

Your credit score will be assessed and is a key component in the approval process. The majority of Canadian providers require a minimum score of 660, although of course this number may vary based on the institution and the type of card for which you are applying. The higher your credit score, the more likely you are to be approved, and the better access you get to higher credit limits and rewards. 

Employment

Being employed is important as it shows you have a source of income. Credit card issuers want to know that you will be able to make your credit payments in full and on time. This is also why your income is considered together with your employment status, as it will help predict how much credit you will use and how likely you are to make your payments on time.

Credit History & Utilization

Your credit history is evidence of your ability to make your credit payments. It is harder for issuers to make a judgment call when there is little to no history to reference. Additionally, the higher your credit utilization ratio is, the riskier you are as a client for most banks. The more credit you use, the more you will need to pay back. Issuers see high credit spending as riskier because they are lending out more money. 

How to Improve Your Credit Cards Approval Chances?

The following are a few strategies to improve your approval chances.

Improve Your Credit Score

The easiest way to improve your chances of credit card approval is to improve your credit score:

Maintain Credit History

First, you have to make sure you have a responsible credit history. If you have little to no history or are trying to rebuild your credit, you may want to consider a secured credit card. These are easier to get approved for because they require a security deposit and have a small credit limit. 

On the other hand, you may have an old credit card that you rarely or never use. Retain this line of credit and use it often enough to keep it open. This is a testament to the history of your ability to manage your debt and credit. If you close it, you will shorten your credit history.

Reduce Credit Card Utilization

Next, you will want to reduce your credit utilization. Your credit utilization rate is the total amount of credit you use out of your total available credit. This number is determined across all lines of credit you have. Borrowell suggests keeping this rate below 30%. You can decrease it by either increasing the amount of credit available to you or lowering how much credit you use.

If you choose to increase your credit limit, be aware that this may impact your score. When potential lenders perform hard checks on your credit scores, it can have a temporary negative impact and remain on your credit profiles for up to three years.

Increase Credit Diversity

Another strategy to diversify your credit mix. Credit cards, loans, and mortgages are all examples of different types of credit. The variety of different types shows credit bureaus that you can handle more than one type of credit at a time. 

Keep a Close Eye on Your Credit Report

An extra step you can take is to examine your credit report in detail. Even credit bureaus make mistakes, so it is best to develop a routine to review your credit report regularly. This way, you can dispute any errors that may negatively impact your score. It will also make you aware whether you are raising your score, staying the same, or decreasing it.

You can access your credit report for free with Borrowell.

Don’t Miss Any Payments

It may seem obvious, but be sure to make your bill payments on time. On-time payments make up about a third of your credit score, so they are paramount in increasing your score. Lenders want to see long-term consistency, and this is the step that is used to build that history. You can choose to make more than your minimum payment, decreasing your utilization rate and how much you pay in interest. 

However, be wary of paying off all of your loans at once. It can be tempting to live without debt, but your perceived ability to manage your credit payments becomes less clear without these monthly payments. As a result, you may see your credit score drop.

Do Your Research

Each credit card company and lender has specific approval requirements. Look for these requirements and select the best option that aligns with your situation. For example, it is much easier to qualify for a secured credit card than for a premium card.

Typically, you will need to answer some general identifying questions like your name, date of birth and social security number. You should also expect questions regarding the total amount of debt you currently have, your net income, and monthly expenses. 

In addition, you should formulate an answer for why you are seeking a credit card. Someone looking to build credit may be seen as a less risky client than one using credit to make routine purchases because they just got laid off. Of course, you should be honest in your answers, or you can be charged with credit fraud.

Will Applying for a Credit Card Hurt My Credit Score?

Yes, applying for a credit card can hurt your credit score. As previously mentioned, lenders will pull a detailed report of your score, which can have a small negative effect. Taking on more debt or credit is considered a risk factor because credit bureaus do not know what your habits will be like with this new line of credit/debt. The drop in your score is only temporary, as your habits will reflect your ability to manage your credit and debt. 

How To Check Your Chances of Credit Card Approval Without Hurting Your Credit Score?

Seek out pre-qualification. Pre-qualification is used to help determine if you meet certain requirements, but this does not guarantee that your application will be approved. Fortunately, it does not hurt your reputation or your credit score. That’s because it is a “soft” inquiry that only gathers a limited amount of information rather than your full credit report, and it is not reported to the credit bureau. To check to see if you prequalify, you can contact credit card issuers directly, keep an eye out for mailers, or visit their website.  

What To Do if Your Credit Card Application Is Denied?

If your application is denied, use it as a learning experience. Inquire about why your application was denied by contacting the lender. 

Do not apply for another card right away because the hard pull will cause your score to drop. Instead, continue to work on your credit score, reduce debt, increase your income, and eventually seek out a different card that will better suit your situation.

The Bottom Line

Application approval centres around meeting the requirements set by card issuers. These are usually made up of your credit score, the total debt you have, and your income. Based on these requirements, you will want to choose the credit card that suits your situation the best. If you are denied, remain calm since you can apply again in the future. In the meantime, continue to employ strategies that strengthen your credit score so that you’re more likely to be approved when you apply again.