A credit card application hinges on many factors, but one that gets overlooked is the credit score. Even with a steady income, your score could leave you with slim to no chances of getting approved, or getting approved with strict stipulations. That is why improving your score is vital before you apply for a credit card.
The score reflects your past borrowing behaviors. It certainly doesn’t take a rocket scientist to figure out what step(s) are necessary to improve it, but it does take a level of dedication and patience. Having a thorough understanding of the factors that are included in the score will help you prepare for your credit card application.
Why credit score matters when you apply for a credit card
A credit card is a type of short term borrowing. Lenders extend this privilege to you on the assumption that you will pay it back. Your score gives a clear summary of how you have repaid your debts in the past, how much you owe, and how much you have left to borrow.
The higher the score, the easier it is to get approved, as well as a higher limit with favorable terms. The lower the score, the higher the risk and the more likely a person will be to get denied or put on a spending limit. This is why you need to improve your credit score before you apply for a credit card.
Steps to take to enhance your credit score before applying
- Make all payments on time.
The influence of payment history in determining your credit score is significant. Just a couple of days tardiness in a payment can result in a decline in your score. Trust is built when payment obligations are made before or on the date they are due.
High debt utilization negatively influences your score. Make it a point to pay off your debts (don’t max out credit limits) in order to demonstrate that you are in control of your credit.
- Don’t make several credit requests.
The score will decrease if there are many credit requests in a short span of time. Anytime a request has been made, there is a record that will pull down your score. Stop making credit requests until you have completed your improvements.
- Review your credit report for mistakes.
It is not uncommon for credit reports to have errors (missing payments, wrongly captured payments). Inadvertently, these factors can cause your score to decline. Reviewing the report and fixing the mistakes will help to fix the score that is being negatively affected.
- Keep older credit accounts open.
Older accounts are data that reflect your credit history length and behavior over a period of time. If you were to close them, it would lower your score. Simply having them open and not using them will help.
- Keep a healthy credit mix.
Being able to handle a variety of credit is a positive indicator. If you have a mix of credit accounts (e.g., loans and credit cards), it is good to keep accounts open, but avoid taking on new debt just to have a better mix.
- Restrict cash-based borrowing
Informal loans do not show up on your credit report. On the other hand, loans with structured repayments through recognized credit will help improve your score, as they will become visible.
How long do I need to wait to see improvement in my credit score?
There are several steps that need to be followed in order to see improvement in your credit score, however, these steps cannot be done in one day. A positive impact will be visible in after a few months with on time payments and a lowering on your credit. If there are major issues, then the score is not going to greatly improve in the short term.
Rather than speed, consistency is what is going to matter. Small, consistent efforts will lead to the best progress over the long term. Do not take the quick fixes that will make your score improve overnight, because they will not work.
Things to consider before applying for a credit card online
When your score improves, go back to your credit profile one more time and check that there are no overdue payments and that the balances are all manageable. This will help avoid a rejection.
Look for a credit card that aligns with your income level and your spending habits. If you apply for credit cards with high spending limits that do not match your income level, it will result in a rejection, affecting your credit score.
During the application, you have to provide all the required information that is needed. If there are differences between your documents and your application, that may delay the process.
Things to avoid while improving your credit score
To avoid progress slowing down, do not close accounts that have balances on them. Closing accounts can make your score go down as it shortens the overall length of your credit history. Refrain from using the full limit after making payments, which will cause your progress to be undone.
Mistakes with minimum payments or small dues can also cause problems. Even small missed payments impact the score. They can accumulate and cause bigger problems.
Conclusion
Your credit score influences the approval process and stress levels during the card application process. Paying dues on time, keeping balance down, avoiding too many applications in a row, and checking your credit report improve your score. Applying for a credit card after preparing makes the process easier and makes outcomes more predictable. A good credit score improves your chances of getting a credit card from being a rejection to being a valuable financial instrument.
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