You want to know how credit card applications work? Well, the simple fact is that you are more likely to be approved if you have a high credit score, but there are other things to look at as well. The basic theory behind getting a high credit score is actually pretty simple. Pay your bills on time, don’t carry too much of a balance on any one card, don’t apply for too many cards all at once and establish credit at an early age. But sometimes you can do all of the above and still not get an instant approval. So why not?
There are lots of reasons an applicant might not get an instant approval but if you have a stellar credit score (750+) and a clean history it’s likely that there is something very small that tripped up the computer. At the end of the day, since it’s just an algorithm that determines whether or not you’ve been instantly approved, the slightest mistake, typo or discrepancy could screw things up for you.
Here are some things that you should know about how credit card applications work and watch out for:
Your credit history will list all of your past addresses but it doesn’t know where you currently reside. So if you move to a new address and don’t give the credit bureaus time to update their records, a new application with a brand new address will set off red flags.
Credit card companies do this as a precautionary measure against identity theft. So if you apply with an address that isn’t on your credit report, they will put your application on hold until they’re able to verify your address. Sometimes they won’t call for up to a week though so it’s important to be proactive in this situation. Any time you’re not instantly approved, you should try and call the reconsideration line immediately.
The most important part of your application is really your name and social security number. Without it, banks have no way to verify your identity and ensure that you are who you say you are. Make sure you don’t rush through this section too quickly since a typo here will definitely hold up your application.
Normally, after you submit an application for a new card there is a confirmation page that will pop up. Take a close look at this page and ensure that all of the information listed is correct. It’s a lot harder to change things later than it is at this point in the process.
We don’t always know what’s going on behind the scenes at credit card companies. Sometimes even if you have good credit, you’ll still have to verify your identity. And each bank has their own verification process. I’ve had to do everything from send in copies of my driver’s license to submitting tax forms.
If this happens to you, don’t worry, it’s just a part of the process. Be persistent and make sure you follow-up with the credit card companies to ensure that your card will be approved as quickly as possible.
Even if you have a very high credit score, there is still one thing that credit card companies don’t like to see: lots of inquiries. Remember, for the most part how credit card applications work is that they check your credit score. Since new credit inquiries make up only 10% of your score, you can potentially have 5-6 recent inquiries and still have a very high score, but more inquiries than that can damage your credit pretty significantly.
Inquiries will fall off your account after two years, so if you spread out 5-6 inquiries over two years that isn’t a big deal to most banks. But if you have 5-6 inquiries in the past few months, most card issuers are going to wonder why you suddenly need all of that credit.
When you ask how credit card applications work, you need to know that if you are not approved instantly you can call the bank to talk to them about your application, trying to persuade them to accept you. If you decide to apply with recent inquiries, just make sure that you have reasons why. That way, when you call into the reconsideration line you can tell them you were shopping for a mortgage or need a couple extra cards for an upcoming vacation.
Remember, too, that your credit card limit is based on income as well as your credit rating. If you make a lot of money but have too much credit extended to you already or have a poor credit score you may get a very low limit. But you could make just $20,000 a year and if you have no other debt you might get a pretty high limit, with a good credit score.
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