Apply for credit

When and how you apply for a credit card can make all the difference in your credit limit, terms — even whether you are approved in the first place. Some factors you can’t really change, such as a history of bankruptcy or missed payments. Some require a change in behavior. But some can be altered just before you apply, and a little planning can help you qualify for the credit card you want.

Some easy credit cards to get

The Capital One® Secured MasterCard® offers one of the lowest minimum deposits in the business: depending on your credit score, a deposit of $49, $99 or $200 will get you a credit limit of $200, and you can even pay in installments if it’s hard to make that initial deposit. Among the big banks, Capital One is known for being more willing to lend to people with a spotty credit history. It has an annual fee of $0. The US Bank Harley-Davidson Visa Secured offers 1 H-D rewards point per $1 on your purchases not bad for a secured credit card! Granted, H-D points aren’t as good as cash — but the annual fee is $0, which is great for a secured card. The credit limit ranges from $300 to $5, 000, depending on your deposit, and you have to put in your entire deposit at once.

Why aren’t we recommending unsecured credit cards?

Truth is, if you have bad credit, you’re pretty much stuck with a secured credit card (which means you have to put down an initial security deposit). If you really, really, really want an unsecured credit card, the offers you’ll see are borderline usurious, with annual fees above $75, sky-high interest rates and fees for doing something as simple as raising your credit limit. We don’t support credit cards with these terms, and we refuse to endorse them here.

1. Get your finances in shape

There’s nothing you can do about missed payments or a bankruptcy in your past. Thankfully, your credit score considers your most recent behavior more important than what happened three or five years ago. If you show that you’ve cleaned up your previously spotty payment history, credit card companies are more likely to consider your application.

2. Don’t apply for too many cards at once

Every time you apply for credit, the lender (including a credit card issuer) looks at your credit. When that happens, your credit score takes a hit. (If someone checks your score for a reason other than a credit application that you submitted, then you’re off the hook.)

What this means in practical terms is that you shouldn’t apply for two or three cards all at once, or even space your credit limit increases too closely. Even though it may seem like a good idea to apply for a backup credit card in case you’re rejected for your top choice, it looks to lenders like you’re suddenly asking for a lot more credit. They’re more likely to look at you nervously.

The exception to the “spread out your applications” rule is mortgages, student loans, auto loans or any other loans that involve rate-shopping. In that case, it’s expected that you’ll go from bank to bank, comparing their rate offers. Credit scoring models lump all of those types of applications made within 14 or 45 days as just one inquiry. (Older scoring models use 14 days, and newer ones use 45; lenders choose which version to use.)

3. Lower your credit utilization ratio

One of the best ways to prove your creditworthiness is showing that even though you’re trusted with credit, you aren’t relying on it. The way to demonstrate this is by lowering your credit utilization ratio, or the amount of credit you’re using compared to all the credit available to you. For example, if you have two credit cards with $5, 000 limits and you carry $1, 000 of debt on one and $4, 000 on the other, your debt utilization ratio is 50%. Generally, 30% or less is considered a healthy ratio.

When you apply for a card, make sure you haven’t racked up a lot of debt on your existing cards. Even if you’re planning to pay off your debt at the end of the month, before you have to pay any interest, lenders still count it as debt. A good time to apply, then, might be right after you’ve paid off your credit card.

4. Set your sights on the right credit cards

We mentioned that your credit score gets dinged every time you apply for a card. You can minimize your applications by having realistic expectations about what you’ll qualify for. You probably won’t get The Platinum Card® from American Express with a 650 FICO score, for example. While people with excellent credit get the pick of the litter, if you have average or bad credit, you’ll need to consider other options:

• have few or no restrictions on who qualifies. The Capital One® Secured MasterCard® is a good choice for people trying to build or rebuild credit, but remember that it requires you to put down a deposit of $49 to $200. Luckily, its annual fee is $0, making it an economical choice compared to other secured cards.
• will not help your credit score at all. Since you’re not being extended a line of credit, scoring models don’t include them at all. Plus, they’re often riddled with hidden fees, so be very, very careful if you get one.

Interesting facts

• In finance, Credit risk management is the process of assessing risk in an investment. When the risk has been assessed, investment decisions can be made and the risk vs. return balance considered from a better position.
  The main way to reducing credit risk is by monitoring the behaviour of clients who wish apply for credit in the business. These...
• Prescreen is the process by which a lender proactively evaluates a consumer's credit history in order to decide whether or not to offer them credit. The process of prescreening consumers happens without the consumers' knowledge and without any derogatory effects on their credit file. The use of credit data for prescreen is strictly regulated by...