How to Know if You Should Apply for a Credit Card
Finding and applying for the right credit card is pretty easy. One time you know your credit score and have determined your needs, it's all about choosing the right card, getting your information in guild, and applying.
A credit carte is like a razor-abrupt pocketknife: it can either be an invaluable tool or a dangerous weapon. You'll want to take your time picking the one that meets your specific needs and and so wielding it very, very advisedly.
Simply do that, and the rewards can be tremendous!
Having the right bill of fare tin can lead to peace of listen, tons of greenbacks back, and best of all – you'll build credit (when yous employ your card the correct way!)
Understand your credit score
The very first step in how to apply for a credit menu is to understand your credit score , since that number will dictate which cards y'all should get (or whether y'all should become 1 at all).
What is a credit score?
A credit score is a three-digit number between 300 and 850 that represents your "grade" as a potential borrower of money.
It's calculated by the big credit bureaus who look at your history of borrowing money and paying information technology back, every bit reported by your lenders. The FICO score is the most pop blazon of credit score, which is why you'll frequently see the ii terms used interchangeably.
Anyhow, things like making on-time payments, paying bills, and not applying for too many loans at in one case will all help to build your credit score.
Conversely , missing payments and applying for also many loans as well oftentimes tin can hurt your credit.
You lot can read all about credit scores in our feature How Credit Works: Agreement The Credit History Reporting Arrangement .
For now, all you need to know is this: your credit score volition dictate which card you can (and should) apply for.
What is the minimum credit score needed to be approved for a credit carte du jour?
FICO scores are ranked thusly:
- Poor: 300 to 579.
- Fair: 580 to 669.
- Good: 670 to 739.
- Very Skillful: 740 to 799.
- Exceptional: 800 to 850.
The most basic, no-frills credit cards crave off-white credit, while the height-of-the-line rewards cards named afterwards rare earth minerals all crave very good credit.
Read more:What Credit Score Do You lot Need To Become Approved For A Credit Bill of fare?
Acquire how to utilize a credit card responsibly
Not to sound like your dad, but learning to use a credit carte responsibility is something you want to learn before yous get the carte du jour – non subsequently .
Again, a credit carte du jour is similar a very sharp knife – useful and valuable – or dangerous.
It can exist surprisingly like shooting fish in a barrel to slash your ain credit using a credit bill of fare – and the card companies don't actually warn you when you're about to do it. To illustrate, hither are the two "features" of your credit card that sound innocuous, but really have disastrous consequences if y'all misinterpret them:
| What your credit bill of fare statement says | What it sounds like | What is actually ways |
|---|---|---|
| Your credit limit is $5,000 | You can put up to $5,000 worth of spending on your card without penalty. | You can put upward to $5,000 worth of spending on your card without penalisation from your credit card company. Your credit score, withal, will take a hit. Maxing out i of your lines of credit is bad for credit. To protect and amend your credit score, go along your carte du jour spending to beneath 40% of your credit limit. |
| Your minimum payment due this month is $35 | As long equally yous tin make the minimum payments each month, you tin can keep using your carte du jour and just pay the rest off later. | If yous owe $i,000 on a menu with ~29.99% variable APR and you only make minimum payments, you'll pay most $710 in interest and information technology'll have you 49 months to pay off your residuum in full. Plus, carrying over debt next calendar month means y'all're approaching your credit limit, which as we've established volition hurt your credit score. |
Needless to say, a credit menu is not something you should just rack up each month. That'due south what the big card companies desire you to practise so they tin charge you gobs of interest!
How should I exist using my credit card?
Responsible credit carte du jour usage is pretty simple and straightforward:
- Your net purchases should never exceed l% of your credit limit.
- Pay it off each calendar month (or, better yet, gear up upwards Autopay).
- Be mindful of your rewards and maximize them.
- Take advantage of your 0% APR period, if you need it.
When you're starting out with your first credit card, it'due south best to recall of it similar your debit card – like the money is getting instantly withdrawn from your depository financial institution account.
Read more than:How To Use A Credit Menu Responsibly
Choose the right card for your needs
Most credit cards generally fall into one of six buckets. It's a lot, I know, only you'll want to consider all six to get the one that's the best fit.
The six are:
- Secured credit cards.
- 0% intro APR credit cards.
- Student credit cards.
- Travel rewards credit cards.
- Premium (paid) rewards credit cards.
- Regular rewards credit cards.
Here'south a breakdown of each, and which might be the right fit for you:
For poor credit → secured credit cards
As hinted above, if y'all have a credit score below 600, you may not qualify for any of the other cards on this list. Non the terminate of the globe! You may simply take to spend some time building credit with a secured credit carte.
Secured credit cards require you to put down a cash security eolith, which the credit card company can pull from if you miss a payment. When you've built your credit enough, your credit card company may then help you seamlessly upgrade to one of their regular rewards cards (and refund your deposit).
To help you determine, bank check out When To Consider A Secured Credit Card – and if information technology'south a fit, visit our list of the Best Secured Credit Cards .
For conveying a balance → 0% intro APR cards
If you have practiced or excellent credit (670+) and think you may need to carry a residual month-to-month, consider a card offering 0% intro April.
You'll frequently see this advertised equally "0% intro April for 18 months" or thereabouts. And thankfully, it's exactly what it sounds similar – equally long equally you lot pay your full balance on the bill of fare off within eighteen months, you won't be charged a dime of interest.
And since 0% intro Apr cards are so pop these days, some even offering 1.5% unlimited cash rewards!
If you exercise get a zero-involvement carte, just recall non to max information technology out since that can negatively bear upon your credit score!
Check out our list of the Best 0% APR Credit Cards .
For students → student cards
If you're still in school, you may have both limited income and limited credit history. Non to fret – there are actually credit cards designed specifically for your needs that can help y'all build your credit while fifty-fifty earning a trickle of rewards.
Check out our list of the Best Credit Cards For College Students .
For frequent travelers → travel rewards cards
If you're always on the move and spend big on flights, rental cars, and hotels, yous'll get the most benefit from a travel rewards card. They too contain a bevy of benefits that brand traveling easier. Complimentary trip insurance, lounge access, and a 24/7 concierge y'all tin can phone call upwardly for booking help are all common perks for travel rewards cardmember.
Word of caution – many travel rewards cards have annual fees, and but really pay for themselves if you travel a lot .
Simply if that's you, check out our list of the Best Travel Rewards Credit Cards.
For large earners, large spenders → premium (annual fee) rewards cards
If you earn and spend a lot , and you accept very proficient or excellent credit (740+), an annual fee, premium rewards card might actually make sense for you.
These cards tend to charge an annual fee of $95 to $695, but they come jam-packed with industry-leading perks, benefits, and upward to x% cash rewards on qualifying purchases.
Annual fee cards can be unsafe in the hands of the inexperienced, however, as they tend to suck people into spending habits they can't actually afford. They're probably non a fit as your offset credit carte du jour, but I wanted to at least make you aware of them.
To educate yourself on the perks (and pitfalls) of annual fee cards, bank check out my other piece Are Amex Cards Worth Information technology ?
For everyone else → regular rewards cards
For the majority of commencement-fourth dimension cardholders, a expert ol' vanilla rewards card will exercise simply fine.
These days, your average rewards card volition take the post-obit features:
- Credit required: 670+.
- Cash rewards: 1.five% – 5% cash rewards on eligible purchases.
- Intro sign-upwardly bonus: $150 – $250.
But like a skillful froyo, rewards cards can come with all kinds of toppings and flavors. Some offer 0% Apr in addition to rewards, others a flake more than travel rewards, and some even offer 2% unlimited cash back on everything .
Prepare to apply
Applying for a credit card is a pretty straightforward procedure (carte du jour companies don't want to bog down new clients, later on all) – but there'south all the same a petty prep work you can practise to expedite your application process.
What practice yous need for a credit card awarding?
- A social security number. For nearly credit card companies, o nly U.S. citizens with social security numbers tin can utilise for a credit card.
- A source of income.Banks want to know that you're making enough coin to pay your credit card pecker each month. They typically don't request proof via pay stubs or W-2s, but still – don't fib on this or any other financial awarding – you lot'll surely regret information technology!
- Good credit.Finally, your carte du jour issuer volition desire to take a good long look at your credit score. Since credit cards are a type of unsecured loan with no collateral attached, banks desire to know that they can trust you as a borrower.
Don't forget virtually pre-approval
Preapproval is an optional step to see which cards y'all might get fully canonical for without making a hard pull of your credit.
During preapproval, a credit menu visitor will typically request your:
- Name.
- Address.
- Social security number.
- Income.
- Monthly rent/mortgage.
- Credit score estimate.
Then, if everything looks expert, they'll tell you which of their cards you're likely to get canonical for.
Why should you get pre-approved?
Preapproval tin relieve you the hassle and disappointment of getting rejected for a card – non the mention the ding to your credit. It's a good thought if you're correct on the cusp of a menu's credit requirement, i.due east. 667 and they crave 670+.
Read more: How To Get Pre-Approved For A Credit Card Earlier You Apply
Finally, apply!
Here's what your typically online credit carte application volition request:
- Personal info.I typically never give my real phone number online, but this is the rare exception since they'll employ all this info to verify your identity.
- Income.Once more, your bank will desire to know your income and biggest monthly expense (rent) so they can guess your ability to pay off your card each month. They may as well ask how long you've been at your electric current residence, again, to verify your identity.
- Signature.A credit card application is a binding, legal contract, so the bank volition demand your John Hancock for their records.
- Authorized users.If you'd like an extra card for your child, spouse, or another person to use, put their proper noun hither. Go on in heed that authorized users aren't cosigners; you and you lonely are responsible for the full monthly payment.
- Balances to transfer.Finally, if y'all're looking to initiate a balance transfer from your old card onto your new card, here'south where you'd put the relevant info. To acquire more most balance transfers and whether information technology's a good idea, check out How Do Credit Bill of fare Remainder Transfers Work .
That's it! Equally far every bit financial documents become, pretty short and simple. Most of the due diligence is done on the dorsum end by the card issuer.
Oh, and every bit you employ for cards, you'll want to keep an heart on your credit score. Credit monitoring is good practice in general, since yous'll want to address surprise drops before applying for another bill of fare.
Summary
Credit cards, similar knives, can exist unsafe if wielded willy-nilly. Only go the one that fits your needs and handle it with care, and you'll make magic happen.
The perfect credit card doesn't just offering cash back – it builds your credit and ferries you to financial prosperity. And so have your time, follow the steps, and utilise for the bill of fare that's right for yous.
Read more:
- 14 Subconscious Credit Card Perks And Benefits You May Not Know Existed
- How To Yous Apply A Credit Bill of fare To Make Money And Earn Extra Greenbacks
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Source: https://www.moneyunder30.com/how-to-apply-for-a-credit-card
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