Hi. My name is John Ulzheimer, and I'm credit expert who contributes to
CreditCardInsider.com. If you've got any questions for us then please submit them
in the comments section below and we'll
address them as quickly as possible. Today's question is this... How will I know
whether or not I will be approved for a credit card? What factors
go into the credit card approval process?
Excellent question. There's a lot of moving parts to this. When you apply for a
credit card, first off, the type of credit card you apply for is going to largely
dictate what type of information they're going to look at in order to determining their
decision as to whether or not they want to approve you or deny you.
For example, you're applying for a basic credit card. You know, a $10,000 credit limit, kind of a
garden-variety credit card. Then it's very likely that the decision is going
to be based almost entirely on your credit report and your credit score, and
really nothing other than those 2 pieces of information. However if you're
applying for what you would consider to be the "apex predator", if you will, in the credit card world.
Something with a really high credit limit, $40,000, $50,000, excellent terms, something
that's really reserved for what people refer to as the "credit elite"
then your decision is going to be based on a variety of other
metrics. So first and foremost, they're absolutely
gonna pull credit report. They are absolutely going to pull a credit score. However,
most of the larger credit card issuers will then take that information and then feed it
into their own custom developed credit scoring systems. So they'll actually use
your score within their score. And I realize it's kinda hard to imagine. That if you've got
a really excellent credit score, and it's then actually going to yield a really excellent credit
score in their system as well. These are referred to as custom application scores
or application processing scores. And essentially they're taking the
information not only from your credit report, but information from the
application, such as how long you've
lived at the same address the presence of a checking or savings account, how long you've
worked in the same industry, how long you've been on the job. And they're going to take
these types of things that are not on your traditional credit report, and kind
of use the aggregate of those pieces of information to determine their
decision to approve or deny. They're also going to consider your income. For a
relatively low credit limit card, they are considering your income, because
they're required to by law. However it's not the determining factor. So someone who's
applying for kind of a garden-variety card, you really don't have to have this
incredible income to qualify for it. However, if you're asking for something
that's very atypical, like a card with either a six-figure credit limit or
something in that arena, then it's very likely they're going to ask you for some
sort of proof of income. And that can mean, pay stubs, tax related information,
deposit related documents from your bank, something that indicates to
them the type of money that you make and the type of money you bring in every single month.
That's very unusual. And it's very likely that almost every single person watching this
right now, will never have to go through anything like that, because frankly
you don't need an $80,000 credit limit to function effectively. You can function effectively
with a much lower credit limit. And if you need larger amounts of available credit from
plastic, then you can apply for multiple credit cards from multiple issuing banks, and kind of cobble
together, if you will, a really large amount of buying power or buying capacity
by doing so. And you don't have to go through these, kind of
a typical underwriting processes. You're not going to know if you're going to be
approved before you apply. There is nothing that says if you do this this
and this, you're guaranteed to be approved.
Generally speaking, if you've got good credit, good credit scores, and you have
an income, you're gonna be approved for something. And that something might be,
just a classic credit card with a very low credit limit,
or a credit card with a $20,000 or $30,000 credit limit and a 0%
interest rate for 18 months. It just depends on where you're going to fall, kind of, in that
range, if you will, of credit card offers. If you've got very poor
credit, and very poor credit scores, you really shouldn't waste your time
applying for those really high level cards, because you're simply not going to
be approved. You're either going to be denied outright, or you're going to be counter-offered something that's much much less
advantageous as far as terms go. So my best piece of advice is be realistic and
reasonable. If you've got good credit,
expect a good response. If you've got poor credit, then I think you should brace
yourself for something that's not terribly attractive as far as the card that
you would get if you were to be approved. So if you have any other
questions pertaining to credit or financial topics please submit them to
CreditCardInsider.com or in the comments section below. Thanks a lot for watching!
And have a nice day!