I’ve been talking about which credit cards I want to get in the next few months. I’m actually making lists, comparing cards, and carefully deciding which ones I want to go with like a high school student deciding on which colleges to apply for. I think these things through a lot. I’ve done calculations. I’m preparing myself for these cards that I am certain I’m going to have in the next four months or so. I’m sure to many of you this seems silly and like overkill, but it isn’t completely. I am spending so much time planning because I’m less like a stressed out high school student deciding on their future alma mater and more like an overly excited kid making out their list for Christmas presents. However, planning is sometimes necessary if you want to ensure approval and planning is also useful in handling your finances in general.
Pay Down Your Current Debt
This is a quick fix to your credit score which is what lenders look at to determine whether or not they want to give you credit. The amount of debt you have is the second biggest factor in your FICO score. This includes your loans and credit card balances. You will want to pay down your loans too, but for the purpose of looking good to banks so you can get the credit card you desire you will want to focus on your credit card balances. Pay those down so your credit utilization is low when you apply for credit. I always see the rule of thumb to keep your credit utilization below 30%, but if you want to really up your score keep it below 7%. If you can afford to get your balance down to under 7%, awesome. If not, then try to get it as low as possible and keep it there until after you are, hopefully, approved for the card so that low balance is what the bank sees on your report.
Make Your Payments on Time
This is more of a longer commitment to make, but every on time payment counts towards your payment history which is the most important FICO factor. If all of your payments have been on time that’s amazing, but if you know you’ve had some missed payments, use the months before you apply for credit to make on time payments. FICO factors in how many months it has been since your last late payment so try to make your last late payment as old as possible.
Check for Pre-qualified Offers
Pre-qualified, pre-approved, pre-whatever. If you see a credit card offer in the mail saying any of these things, your odds of being approved are greater than for those that you never receive offers from. Some banks even have a feature on their websites that allow people to check to see if they pre-qualify for any of their cards. Pre-qualifying doesn’t necessarily mean that you won’t be rejected. They still have to do a credit check which is why it is important to make sure your credit score stays up to par during this time. If you know something has happened recently that might lower your score, be prepared to fix it or face a possible rejection.
Check Your Credit Report
This goes hand in hand with the points made above. Credit reports aren’t always accurate so it is important to check them regularly and it is a good idea to check it before applying for a new line of credit. Make sure it is ready for judgement day so to speak. You can get a free credit report from each of the three bureaus each year from annualcreditreport.com or you can sign up for Credit Karma for free and view your Transunion and Equifax reports for free each month. Credit Karma also gives you a rough estimate of your credit score. It’s not accurate, but the score and its explanation of the factors will help give you an idea of where you stand. Just don’t take it too seriously because that is not your actual FICO score. Other free sites like Mint, Credit Sesame, and credit.com will give you an estimated score and insight into what is affecting that score, but they don’t allow you to see your actual report. If you feel like paying to get your actual FICO scores (there are 9 different FICO versions and scoring models specifically for credit card and auto lending) and simulate how certain actions, like paying off your credit card balances, will affect your score you can always sign up for myFICO.
Do Your Research
I believe in looking before I leap. Impulsivity can be good in certain cases, but when it comes to money it usually isn’t a good idea. Thanks to the internet, information about pretty much everything is available at your fingertips so take advantage of it. Search for information on the card you want and make sure it really is worth it. Look at forums and blog reviews on the card and hear what people who actually have the card have to say. You can find out a lot of information from reviews and forum posts including what caused people to be approved or rejected. Sites like Credit Karma and myFICO also have sections on credit cards and what scores typically get approved for each card as well as member comments and reviews. They also tell members what their approval odds are (great odds do not guarantee an approval). Research is so easy to do, so don’t be lazy.
All of these tips work not only when applying for credit cards, but also for auto loans and mortgages. Planning ahead when applying for a card or loan could help prevent unnecessary hard pulls on your credit report which can lower your credit score. It can also mean you get better interest rates that save you money and higher credit limits which can help out your credit score. So take your time, follow these tips, and your odds of getting approved will increase.