When you’re ready to apply for a credit card, you can take steps to help your chances of approval. Check your credit, see if you’re preapproved and compare card offers before you apply.
Preapproval is not a guarantee of credit, but you have options if you are not approved. Read on to learn how to apply for a credit card.
[Read: Best Rewards Credit Cards.]
1. Know Your Credit Score
You can check your credit score in a few ways:
— Free credit score apps. You’ll get access to your credit score at your fingertips. These apps can offer regular score updates and suggestions for improving your score.
— Credit monitoring services. Many companies provide credit monitoring services that allow you to see your credit score and credit report regularly. Some services are free, while others require a monthly fee.
— Credit card statements. Some credit card companies list your credit score on your monthly statement, or you can find it by logging in to your online account.
A FICO score of at least 670 is generally considered a good credit score. You’ll likely be approved for most credit cards with this credit score or higher, though approval depends on additional factors, including your income and debt.
If your score is a work in progress, you can still find credit cards. You can also pause to focus on improving and monitoring your credit score.
“It used to be hard to check your credit score, but now the most popular way to find it is online,” says money coach and educator Ohan Kayikchyan, certified financial planner. “Most financial institutions offer customers free access to their credit score.”
2. Check for Preapproval
See which cards you’re preapproved for, meaning you have a good chance of approval with a full application.
“The quickest way to see if you’re preapproved for a card is to visit a card’s website,” says John Schmoll, founder of personal finance website Frugal Rules.
Look for a preapproval tool or form on the credit card issuer’s website. Once you fill in your personal information, you may get a list of credit card options.
You can also check for preapproved offers on many bank websites, Schmoll says. “Likewise, you can visit your local bank to learn if you’re preapproved for any offers,” he says.
A preapproved credit card offer doesn’t guarantee approval, though. You’ll still need to formally apply and meet the issuer’s credit and income requirements. But preapproval can save you from applying for a credit card you might not qualify for and triggering an unnecessary credit hit from a hard inquiry.
[Read: Best Cash Back Credit Cards.]
3. Compare Offers and Choose the Best Card for Your Needs
With preapproved offers in hand, you can compare the offers. Here are some key factors to consider when comparing offers to help you choose a credit card:
— Card type. Consider how you want to use the credit card before you choose one. Select a card with a 0% introductory annual percentage rate and not an airline credit card, for example, when you need to pay down a large purchase or balance.
— Fees. Some credit cards charge an annual fee and others do not. Evaluate whether the card’s rewards and benefits are worth the annual fee. Kayikchyan points out that some cards waive the annual fee the first year, but it kicks in the second year. Also look at late fees, balance transfer fees and foreign transaction fees.
— Rewards. Look for credit cards that offer cash back rewards, points or miles. Rewards should match your spending patterns. Consider how you plan to use the rewards and whether their value will outweigh any card costs.
— Sign-up bonuses. You might be able to earn a sign-up bonus, such as extra cash back rewards or points, when you meet a spending threshold within the first few months of opening the account. Make sure the bonus is attainable without overspending.
— Benefits. Credit cards can come with unexpected perks, such as travel insurance, purchase protection or extended warranty coverage.
— Credit limit. Consider each card’s credit limit and whether it meets your needs.
— Interest rates. Compare the interest rates for purchases, balance transfers and cash advances. Look for cards with lower interest rates or 0% promotional rates to save money on interest charges if you plan to carry a balance.
An online card comparison tool can help you evaluate cards and their features side by side. “If you want to compare cards offered by different institutions, the best option is a comparison tool,” Kayikchyan says.
4. Gather Information to Apply
When you are ready to apply for a credit card, you will typically need to provide the following types of information:
— Personal. This includes your name, birthdate, Social Security or taxpayer identification number, address, phone number, and email.
— Employment. You’ll identify whether you’re employed, unemployed or self-employed, and you may need to provide your employer’s phone number or other information for verification. You may also be asked to provide information about your occupation and how long you’ve been employed.
— Financial. Card issuers need to know your gross annual income — how much you earn before taxes and other deductions. You may also be asked about your monthly housing payment to help the issuer determine your credit limit.
Be truthful in your reporting because the credit card issuer will likely verify your information.
5. Expect a Ding to Your Credit When You Apply
You will be asked to authorize a hard inquiry to determine your creditworthiness when you apply: This credit check can temporarily lower your credit score.
The effect of a hard inquiry can vary based on credit history but is usually minimal. “For most people, one additional credit inquiry will take less than five points off their FICO scores,” according to FICO.
However, multiple inquiries within a short amount of time can make a dent in your credit score. You can minimize the effect of hard inquiries by only applying for credit when you need it and managing your credit responsibly.
6. Have a Repayment Strategy
You’re approved! What’s next? Before you start chasing a sign-up bonus, think about how you’ll pay your bill to avoid getting in over your head.
The most responsible way to use a credit card is to only make purchases you know you can afford to pay off when your bill is due each month. You also won’t owe interest charges when you pay your balance in full.
Using a budget and tracking your spending can help you keep your card balance in check. Consider these credit card repayment strategies:
— Pay it off each month. Avoid paying interest and rolling debt into the next month.
— Make more than the minimum payment. Paying only the minimum can result in large interest charges over time. Pay as much as you can each month to reduce your balance and save on interest.
— Set up automatic payments. Opt for at least the monthly minimum payment amount. This can ensure you never miss a payment and avoid late fees and penalty interest rates.
— Prioritize high-interest balances. If you have multiple credit cards with balances, focus on paying off the card with the highest interest rate first. This will help you save money on interest charges.
— Use balance transfers. Moving high-interest debts to a 0% APR credit card saves money on interest charges and pays off your debt faster. You’ll also simplify your bills if you can consolidate several balances onto one card.
— Avoid new purchases. Focus on paying off your credit card balance before adding debt.
“Paying the entire credit card balance every month will save you on interest,” Kayikchyan says. “Even if you carry a small balance from one month to the next, you will lose the grace period on new purchases, so paying it off in full each month is always better.”
[Read: Best Balance Transfer Cards]
What to Do if Your Application Is Denied
Try not to be discouraged if you’re rejected for a credit card. First, find out why you were denied the credit card.
You should receive a notice — it may be oral, printed or electronic — when you’ve been turned down for credit telling you why and which credit bureau provided information for the decision. Check your credit report for inaccuracies if you think the reasons for denial are not valid. You might be unaware of a credit error or other issue on your credit report.
You can use the information from the credit card issuer and your credit report to improve your credit for a better shot at approval next time. For example, you may need to pay down balances, make more timely payments or dispute errors.
How long you should wait to reapply for a credit card depends on why you were denied approval. If the credit card issuer cited poor payment history, put at least a few months of on-time payments on your credit report before you apply again. But if you only need to clean up a credit report inaccuracy or pay down a balance, you could reapply once you handle that issue.
Although you can apply for credit cards as many times as you’d like, remember that multiple card applications in a short window can hurt your credit score and make approval harder in the future. Limiting your applications to the cards you’re confident you can get approved for is a good idea.
You can also ask the credit card company to take another look at your credit card application, Schmoll says.
“If you feel the denial was in error or that you’re a good fit for the card, you can ask the issuer to reconsider,” he says. “In some cases, they can approve the card.”
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How to Apply for a Credit Card originally appeared on usnews.com