Before the recession, almost all the credit card companies were willing to dole out their plastics to consumers. Now, you have to have excellent credit score to make sure that you get approved. The problem is that creditors have varying interpretations of excellent scores. Some consider 720 outstanding while others require that you have at least 750. This makes it even more difficult for students and beginners to start building their credit history.
If it is your first time to submit an application, you surely want it to be successful. This goes the same way if you have been turned down before and you would like to send another request. In order for you to achieve your goal, there are some things that you should know. Here the important aspects creditors examine when considering your application for approval:
- Credit score – Also known as the FICO score, this is comparable to grades in school. If you have a high score, this means that you are financially capable of handling your credit cards and bills. Issuers are looking for stability, taking into consideration the ability of the customer to pay, his or her scores from the three major credit bureaus, and employment status. There is no precise explanation as to how the score is calculated.
- Payment history – If you are able to display a good record of payment, you will most likely be approved. As a matter of fact, this is one of the most important things considered by editors.
- Length of credit – This is also essential if you want quick approval of your application. There’s a huge reason why college students are encouraged to start building their credit early. It doesn’t matter how small the credit line is. The important thing is that you have established credit, which is what creditors want.
- Credit diversity – Do you have several lines of credit? If you have car loans, student loans, mortgage installment loans, and store cards aside from your credit card, this will improve your score. You can use them to your advantage when sending out your application to the issuers.
- Debt to credit ratio – This is also known as debt utilization rate, which influences your credit score as well. This implies the percentage of your credit limit to your balances. For instance, if your current credit limit is 2,000 dollars and your balance is 500 dollars, your debt utilization rate is 40%. The lower the percentage, the better because it means that you are only using a little portion of the credit you have borrowed.
- Co-signers – If you are still in college and it is your first time to get a card, you will need a co-signer. Note that not all creditors will accept you even if you have a co-signer. There are companies that do not cater to youths so you have to find an issuer that allows beginners to obtain a credit card.
If you have existing credit and you want to apply for a new one, it is better if you have a . You can get it for free once a year.