When you stumble upon the credit card of your dreams, the last thing you want is for your application to be denied.
Thankfully, there's still hope – even when you think it's all going pear-shaped. There are several basic steps you can take to improve the odds of getting approved significantly.
Let’s take a look at how to improve your chances of getting approved for the credit card of your dreams.
How Applications for Credit Cards Work
Before we dive into the tips and tricks, let’s briefly run through how a credit card application actually works.
If you’re applying for the credit card of your dreams online, you’ll most likely be asked to fill out an application that’s a page long. Included in this one-page application is information like your name, date of birth, and address.
What's also included is the qualifications you're required to have to apply for an extended line of credit. These qualifications will consist of information like your income, housing costs, and employment status.
Once you submit your application, a computer will process it before returning it to you with one of two answers. These are either ‘approved' or ‘status pending.' Getting the second response isn't necessarily bad. It's also an excellent opportunity to call up the credit card company and talk to someone over the phone about your application.
However, if your application doesn’t end up being approved, there’s a number of possible reasons why. The first is your credit score. You’ve got to have reasonably good credit to be issued a new credit card. Each credit card company has different terms around this, so it’s worth doing your research here.
Other examples of reasons why your application may not be approved are outstanding debt, too many recently attempted credit card applications, or a history of late payments. With all that being said, let’s take a look at what you can do to improve your chances of being approved.
1. Check Your Credit Score and History
Like we mentioned above, when you're applying for your dream credit card, the most critical factor to consider is your credit score and history.
Most major credit card companies now offer their customers free access to their credit score, which gives you a great chance to go over it before you apply for your card. A lot of these services will also provide you with feedback on factors that are directly affecting your credit score.
If you think your credit score isn’t what it should be, you can request a copy of your credit history from a choice of three credit bureaus to dig a little deeper.
2. Stick to Applying for Cards that Match Your Credit Profile
While you may have had your eye on your dream credit card for a while, it can only be your dream credit card if it matches well with your current credit profile.
As a general rule, the more features and rewards a credit card offers, the higher your credit score needs to be to get approved. However, there are a number of ways you can find out what each credit card requires of your credit score online – including your dream card.
3. Reduce The Outstanding Debt That’s Reported to Credit Bureaus
You may not be aware of this, but every month when your credit card’s monthly statement cycle closes, it generates a statement of the month and reports this statement to the three biggest credit consumer bureaus.
At that particular moment, these card issuers have no idea of knowing if at some point you’ll avoid interest charges by paying all your outstanding debt balances in full. Interest charges can be waived if you pay your statement in full, even if the debt is outstanding.
You may have heard the saying ‘banks only loan money to those who don't need it.' Even if you don't have any outstanding balances on your debt, the fact that you have the debt may be enough for a card issuer to be hesitant to approve you for your dream credit card.
This is because the banks are worried about overextending their lines of credit to you, which could result in a default. Once you understand where the bank is coming from with this and how the balances on your statements are reported as outstanding debts, it's easy to take steps to reduce what's actually reported.
The first step to do this is to pay off the card with the most outstanding debt – but you’ve got to do it before the end of your credit card’s statement period. If you pay this debt after the statement period closes, it won’t change what the credit bureaus read on your statement.
If you take this first step with all your outstanding credit card balances, you won’t appear to have outstanding debt to the bureaus. You also may experience a small increase in your credit score as your debt to credit margin reduces significantly.
4. Pay Off Outstanding Balances From the Same Credit Card Company
You can also increase your chances of being approved by your dream credit card company if you wipe out any outstanding balances that you’ve already got with them.
This is because the bank doesn’t have to wait to see these outstanding balances until the end of the statement cycle – they can see them in real time. This means that it won’t take too long after you’ve sent your application through for them to realize that you’ve got an outstanding debt with them.
5. Be Mindful of Case by Case Restrictions
While you may have already done this type of research on your dream card, it still pays to know the conditions and limitations before you sign up to anything.
Some credit card companies will limit the amount of account you can have with them. Others will limit the amount of credit card applications you can make in a certain time period.
6. Include Every Source of Income
A big mistake people often make when applying for a credit card is not declaring all their income. Technically, you’re supposed to include all household income that you have a reasonable level of access to.
The main reason for having a rule like this is so that domestic spouses and non-working partners could have an equal chance of securing their dream credit card.
As well as this, remember to include any other legitimate sources of income. These may include disability benefits, child support, investment income, and alimony.
7. Call Back for Reconsideration
If you haven’t been approved the first time, don’t throw in the towel just yet.
There’s nothing stopping you contacting the bank and asking a representative over the phone to consider your application that way. Before you call, try to pay off your existing outstanding balances like we previously mentioned, especially when it comes to outstanding debts you may have with the bank that you’re applying through.
Sometimes, the representative will approve your application over the phone straight away. Other times, however, you may need to plead your case a bit and explain to them why you think you should be approved.
An example of this is mentioning the benefits and features of your dream card – however, don't mention the sign-up bonus. Also, if you forgot to include all your sources of income initially, you can ask them if they can update your application for you.
If this doesn’t work, you can try shifting an existing part of the line of credit you’ve already got with that bank. Remember, the bank cares about limiting its exposure, just in case you can’t pay back the charges.
By volunteering a line of credit to be shifted, you're making it possible for the bank to offer you a new credit card without increasing its risk of doing so. Finally, if nothing else works, you can suggest closing an existing account that you don't use if it will mean that your dream card gets approved.
Final Thoughts
Finding your dream card is the easy part – it’s getting approved for it that can be challenging.
Instead of taking the rejection to heart and giving up on the application entirely, try these simple tips to increasing your chances of being approved and nabbing that dream credit card you’ve always wanted to have in your wallet.