If you’re looking to add some plastic to your wallet, whether to help you build your credit profile or simply to help make transactions more convenient, the first thing you’ll need to know is how to apply for a credit card. You’ll have to do some research, read some fine print and check your credit before filling out an application for a credit card. Here are the steps you’ll want to take.
Consider Your Finances
It’s important to “be careful about how and when you open new accounts,” Bruce McClary, vice president of communications for the National Foundation for Credit Counseling, said. This is because you want to make sure you’re not only adding something you can’t really afford to have but also because doing so will impact your credit (more on that in a minute).
To help make sure your wallet can take another piece of plastic, you’ll want to take a look at the money you have in the bank, the income you earn and other aspects of your finances to make sure getting a credit card is the right move for you right now. Ask yourself if you can truly afford to pay for charges you make. What about any accompanying fees, like annual fees that typically come with a rewards card?
Know Your Credit Scores
Your spending habits and budget aren’t the only important things to consider before filling out an application for a credit card. Your credit plays a major role when applying for credit cards.
“Knowing where you stand in terms of your own credit score helps set your expectations closer to reality, especially if you happen to have a less-than-ideal credit rating,” McClary said. “Those low rates that appear in the advertisements are usually available only to those with the best credit and may be well below what you might get if applying with an average score, or worse.”
You can find out where your credit currently stands by viewing two of your credit scores for free, updated every 14 days, on Credit.com.
If you discover your credit isn’t quite where you’d like it to be, there are steps you can take. You can do things like review your credit reports for errors that need to be remedied, pay down debts or limit new credit reviews that prompt hard inquiries on your reports until your scores rebound.
Consider Which Card Is Right for You
Knowing where your credit stands means you can have a better idea of what types of cards you could potentially qualify for. For example, if you discover your credit scores are on the lower end of the spectrum, don’t worry — it is possible to get a credit card with no credit, like a secured credit card. However, if you’re looking at some more pristine credit scores, you may look for a rewards credit card that will offer perks for your spending, be it cash back or travel rewards.
Read the Terms & Conditions
“All rate and fee disclosures are available for review before an application for new credit is submitted,” McClary said. “It is your right to see this information before making a commitment with the lender, and seeing the details first helps you avoid any unpleasant surprises down the road,” some of which could be costly.
Fill Out an Application
Notice we didn’t say to fill out multiple applications? That was intentional. Not creating too many hard inquiries at once (because doing so can make you look like a risky borrower to lenders) is an important aspect of how to get a credit card.
“After comparison shopping, settle on one credit card that you would like,” McClary said. “Complete the application after reviewing all of the terms and conditions, then wait for the response. If approved, avoid opening another account right away. If declined, you should consider resolving the issues that led to the rejection before trying to apply again.”
Use Your Card Wisely
Once you are approved for a new credit card — no matter if it’s a basic card, secured card or a credit card with rewards — it’s important you practice good habits with your card. Doing so can have a positive effect on your credit, as well as your finances.
One of the most important things you can do is maintain a good payment history (this accounts for 35% of your credit scores) by paying your statements on time. You’ll also want to focus on keeping your credit utilization rate (the amount of debt you have in comparison to your total credit limit) low, as this is the second largest influencer (30%) on your credit scores. Experts recommend keeping your debt levels at 30%, and ideally 10%, of your credit limit to have the best effect on your scores.