Consumer Tips on Applying for a New Credit Card

Consumer Tips on Applying for a New Credit Card

July 9, 2020         Written By Tracy Farnsworth

Is there a good time to apply for a new credit card? If you are thinking of applying, are there things to do before you do? Statistically, the fourth quarter is the best time to apply. Per Equifax, October, November, and December are the times of the year when the most credit cards are issued. A lot of this has to due with holiday purchases. Consumers are looking for promotional interest rates at a key time when they will be shopping for gifts. The end of the year is the perfect time to find advantageous rates.

While that might be the time of the year when new credit cards are issued, it is not always the best time for your needs. Before you apply for a credit card, make sure you have checked these items off a credit card application to-do list.

Check Your Credit Report

Always check your credit report before you apply. If your score is low or there are inaccuracies on the credit report, it is not going to help you get approved. In terms of your score, these are the factors that are used from least influential to most influential.

1. New Credit: Each credit card or loan product you apply for requires a hard pull of your credit history. That hard inquiry counts against you. One is okay, but too many will drag your FICO score down by as much as 10%.
2. Credit Mix: Having a blend of credit accounts is ideal. Instead of only having student loans, it’s better if you have a mix of loans. Someone with a mortgage, a credit card, student loans, and a car loan may be more appealing than someone who only has a car loan. This also counts for 10% of your score.
3. Age of Your Credit Accounts: How old are your credit accounts? The older they are, the better. It shows that you have been a trusted customer for a long time, which is a sign that you pay on time and are responsible. In terms of your FICO score, the age of credit counts for 15% of your score.
4. Credit Utilization: Credit utilization is a biggie. It counts for 30% of your score. It’s the ratio of total credit lines to the amount you’ve used. If you have your cards maxed out, you are going to have a lousy credit utilization ratio. Ideally, you want the percentage of used credit to be no more than 30%. If you have a card with a $5,000 credit line, you would not want the balance you owe to be more than $1,500.
5. Payment History: Payment history is the most important factor in calculating your credit score. It counts for 35% of your FICO score. Quite simply, payment history is how many late payments are on your account. If you have missed a payment or paid something late, you are hurting your score.

What do you do if you find a problem or have a low score?

Do not apply for a credit card yet. Ideally, you want a credit score of 740 or higher. Scores of 670 to 739 are “good.” You’re “very good” if your score is 740 to 799. If you are at or above 800, you are golden as you are rated “exceptional.” The higher your credit score, the more desirable you are to credit card companies. You will get the best offers.

If you have found a mistake, contact the three bureaus (Equifax, Experian, and TransUnion) and detail the mistake that appears in your credit report. Offer the proof that’s needed to show you made a payment that is not showing up or that an account is not yours. It may take a few weeks for the correction to appear in your credit report. If you have a low score, take steps to improve it before you get a new credit card. Make sure payments are on time, pay down balances as much as you can, and avoid applying for more loans for now.

Assess Your Monthly Expenses and Income

Go over your finances. When it comes to your after-tax income, how is that money spent? Do you have money left over each month that you put into your savings or are you living from paycheck to paycheck? If you do not have money left over for your savings account, how will you pay a credit card bill? It may not be time for a credit card.

Work on reducing your monthly expenses. You can save money using coupons or rebate apps when you shop for groceries. Dropping cable television and signing up for a service like Hulu or Netflix saves a lot. Lowering your electricity and water consumption also saves money. You may find a budgeting app is helpful at learning to track where your money goes and better manage how you’re spending your paycheck. When you have done that, start researching credit card offers.

Only Apply for a Card When You Need It

Do not apply for credit cards just because you got a “you are pre-approved” notice in the mail. Carrying too many credit cards is a bad trap to get into. Soon, you will be trying to keep up with payments on multiple cards. You may have the credit card companies raising your interest rates or reducing your credit line because they fear you are at risk of not being able to pay. Plus, you may be tempted to spend more than you should.

Do Not Fall for Store Card Promises

When you are out shopping in a well-known store, you have probably had a cashier ask if you want to save money on your order by applying for a store credit card. Some store personnel may be pushy because they get a commission for getting you to apply. Say no and be firm. Store cards often have the highest APRs around. If you do not pay off your balance each money, you will spend far more than you have saved. Plus, if you apply just to get the discount and pay off the balance and cancel the card, you have still impacted your credit score with that hard inquiry of your credit.

Research Credit Card Offers Before You Apply

Do not apply for credit cards until you research different offers. If you apply for too many new credit cards, you are going to hurt your credit score. With each new application, you risk having a lower score and poor offer from the credit card issuer. If you research offers first and find out what minimum credit card score is required for them to approve your application, you avoid too many hard inquiries of your credit report. For example, you like the APR and rewards with a platinum rewards Mastercard, but you only have good credit. It is unlikely they would issue you a card without having excellent credit. It’s not worth applying for a card that is unlikely to approve your application.

Can I Know If I Will Be Approved Before Applying?

See if credit card companies that appeal to you offer pre-approval. If they do, you can be pre-qualified, which suggests there is a good chance you would be approved if you apply. You will have a good idea of what APR they may give you. Use that information to narrow your list of potential credit card companies.

Once you have been pre-approved, narrow your list to your favorites. Sort them into your top three. Apply for a new credit card with your first choice and wait. Ideally, they will approve your credit card application. If they do not, move to the second choice. You do not want to have to apply for more than one, but if you do, keep it to no more than three applications to minimize damage to your credit score.

What Type Of Card Should I Get?

You might find that a rewards card that offers cash back and no annual fee is optimal if you regularly pay off your balance in full. If you make large purchases and pay them off over time, a credit card with a low interest or 0% introductory APRs may suit you better. If you are transferring the balance on a credit card with a high APR, look for a credit card promotion with a low interest rate and free balance transfers.

Keep an Eye on Your Interest Rates

Watch your monthly statement to see if the credit card APR is increasing. Credit card interest rates do fluctuate. If they are getting excessive, ask your credit card company for a lower rate. If the company refuses, start shopping around for a credit card with a lower APR and free balance transfers.

Do not rush into the application process. Take your time to read credit card reviews. Ask your friends and coworkers about their experiences with their credit card company. Compare credit card APRs, annual fees, and rewards before you apply. If you’re likely to use a credit card app, find out which get the best ratings and reviews. With some time and research, you will find the best credit card for your needs and apply online for an instant answer.

The information contained within this article was accurate as of July 9, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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tracy

About Tracy Farnsworth

Tracy Farnsworth went straight from a business track in high school to a full-time job in mortgage banking in Burlington, Vermont. After having children, she built a freelance career in content writing and took online classes as time allowed. She completed Social Media Marketing and Digital Marketing certificate programs with Ireland's online Shaw Academy and completed several courses in SEO and analytics. In her free time, she's the “mom” to a very clingy rat terrier, and the pair walk at least a mile every day. She's also a novice baker who is trying to master the art of sourdough bread.