These days, credit cards have become a commodity. If you want to reserve a table at a nice restaurant, buy something online or even reserve a hotel room, chances are, you will need to have a credit card. So, it should come as no surprise that more people seem to be applying for credit cards today than ever before.

Oka Tai-Lee via Compfight

Unfortunately however, many of those that are applying simply don’t know some of the important things that they should look for before completing credit card applications, how applying for credit cards can effect credit scores. Below are the details you need to know before completing your first application and how it is determined that a consumer will be approved or not!

Important Things To Look For Before
Completing Credit Card Applications

The Rates And Fees Section Of The Terms And Conditions – Before you apply for a credit card, it’s important that you understand exactly how much money you will have to pay in interest rates and fees. The truth is, every different offer you come across will have it’s own unique set of interest rates and fees that will be charged to the consumers that decide to use it. The good news is, a lender is not legally able to accept an application without providing a copy of the terms and conditions first. Therefore, you are able to be well aware of what you will have to pay before you have to!

A Trustworthy Lender – As with any industry, you will find that some lenders are better to work with than others. With that said, before applying for a credit card, take a look at the name of the lender that issues it. If you know and trust the lender, go ahead and apply. But, if you don’t, it’s best to do a little research on that lender. Read a few reviews and find out if they are a good lender to work with or not.

Signs Of Secure Online Applications – Unfortunately, there are thieves out there just waiting to get their hands on your personal financial information. One of the best ways to do that is by hacking into non-secure application pages. The good news is, it’s easy to check if your application page is secure. All you need to do is look at the url in your address bar on your browser! If the url starts with https://, it’s secure. If it starts with http://, www. or anything else, do not enter your information!

How Applying For Credit Cards Impacts Your Credit Score

When you fill out a credit card application, you’re not just putting your name on a piece of paper, you’re doing 2 big things. You are asking for a loan and, you’re starting a financial relationship that will have an incredible impact on your financial stability. However, for this section of the article, we will focus on the asking for a loan part.

When you ask for any loan, including credit cards, the lender will ask the credit reporting agencies for a copy of your credit report. When they do so, they will report what loan is being asked for and eventually whether or not you were approved. With that said, it doesn’t look good when you ask for too many loans at once. Too many will cause damage to your credit score.

It’s best to keep it limited to 2 or 3 loan requests in any 12 month period. This can be credit cards, auto loans or any other loans. Also, being declined never looks good. Therefore, before applying for any credit card, you should check your credit score and make sure that you qualify for the offer you are applying for.

Determining Factors In The Approval
Or Decline Of Your Application

Your Credit Score – Of course, your credit score is a factor. However, there are credit cards that are designed for consumers with all levels of credit scores from no credit at all to poor, fair, good and excellent credit. The key is figuring out what your credit score is and comparing offers designed for consumers within your credit score range.

Your Revolving Debt To Income Ratio – No matter what your credit score is, if you are over-extended, you may be too much of a risk to be approved for a credit card. This is based on your revolving debt to income ratio. To figure yours out, add up all of your credit card debts and un-secured personal loans and divide the total by your total annual income. If your revolving debts amount to more than 10% or 15% of your income, you may find it hard to be approved for quality credit card offers.

Your Debt To Available Credit Ratio – If you still have available credit on your current credit cards or signature loans, this looks good to lenders. However, if you have used all of your credit cards and loans to the max or close, it may look like your are overextended even if your debt to income ratio is less than 10%!

About The Author – Joshua Rodriguez

This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance. This article was inspired by Joshua’s latist addition to his most recent personal finance series “Applying For Balance Transfer Credit Cards“.


Digiprove sealCopyright secured by Digiprove © 2013 Mitch Mitchell
Tweet about this on TwitterShare on Facebook0Share on LinkedIn0Share on Google+4It's only fair to share...