Understanding the factors that influence credit card approval is crucial. After all, you can check credit card offers and enjoy them when you receive your card. Hence, the issuer assesses your application before giving approval.
While an excellent credit score can sometimes lead to immediate approval, check credit card offers companies consider various factors when evaluating your credit profile. Payment history, employment, and other parameters all play a role. Here’s what you need to know.
Income and Employment Type
Lenders take your employment status and income into account. A steady and sufficient income demonstrates the capacity to repay the credit card debt on time. If you have a higher income, you may have a better chance of getting quick approval because lenders may consider you financially stable.
Existing Debt
Yet another crucial parameter that influences your card approval. Before approving your card application, the issuer considers your current debt, including your current credit card balance and existing loans. If your debt is high, the issuer may reconsider your card approval. Why? Simply because you may find it difficult to repay the borrowed amount.
Debt to Income Ratio
Lenders determine your debt-to-income ratio by comparing your debt payments to your monthly income. Reducing the debt-to-income ratio can increase the likelihood of getting approval, as that indicates a lower risk.
Credit Score
Issuers assess your overall creditworthiness by checking your credit score. Although this is not the only criterion considered, this plays an important role in your card approval. Issuers use credit scores as a risk indicator to determine your likelihood of repaying debt.
Payment History
The most critical factor in determining your card approval is your payment history. One late or missed payment can lower your score by 50 points, causing a dip in your credit score.
In that case, it becomes difficult for you to get a credit card if you have a poor payment history.
Credit card companies approve only those applicants who can repay the borrowed amount. If your credit history is brief, you may still need to establish your creditworthiness. You can improve your payment history by simply applying these tricks:
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- Pay your bills on time and in full
- Opt for automatic payments if you have trouble remembering deadlines
- Set alerts for due payments to help you understand when the bill is due
- Use a secured credit card if you don’t have any credit history
Credit Card Utilisation Rate
The percentage of your credit limit that you are currently using is known as the credit utilisation ratio. The secret to raising your credit score is understanding how to control these two variables.
Keeping your credit card balances low can also improve your credit score if you already have one or more. Issuers prefer it when your credit utilisation is 30% or less. Your utilisation ratio may increase if you pay off your existing debts.
Number of Delinquent Accounts
Credit card companies may consider the number of past-due accounts listed on your credit reports before approving your card.
Delinquent accounts are past due on credit cards; however, many creditors do not report an account to the credit bureaus as delinquent until it is 30 days following the missed due date.
Issuers generally find it harder to extend credit to people who frequently miss payments.
The late payment may remain on your credit reports for a maximum of 7 years following the late payment date. As you may be aware, a significant determinant of your credit score is typically your payment history. Hence, paying your bills on time is essential.
Hard inquiries
When a card issuer investigates your credit report to determine whether to approve your application, this can result in a hard inquiry. Your credit reports may contain this inquiry for up to 2 years.
Many hard inquiries on your credit reports may raise suspicions with credit card companies. An excessive number of hard inquiries may indicate that you are a high-risk borrower opening numerous accounts due to financial hardship.
Credit cards are essential for modern living, but the approval process can be challenging. All you have to do is check if you meet the eligibility parameters set by the issuer. This helps you get approval without much hassle. Once you get a card of your choice, check credit card flight offers, dining rewards and other benefits.
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