Do You Qualify?
Getting a card can seem as simple as filling out an application and waiting to see how much you can charge, but there is far more that goes on behind the scenes with the card issuer. Here is a look at what card issuers deem to be important when considering credit card applicants:
- Credit score: Your credit score reflects your credit history. For example, do you pay bills on time? Is your debt burden high? Have you filed for bankruptcy? A credit score of 660 or higher is good. You shouldn’t have any problem getting a credit card with a lower interest rate. You may still get a credit card when your credit score is 500 or lower. However, you’ll likely have a lower credit limit and pay higher interest.
- Age: If you’re under the age of 21, you’ll need to show that you have an independent ability to pay, or you may need a co-signer, someone who is willing to pay your credit card debt if you can’t. If you’re under the age of 18, you may need to show that you’re an emancipated minor, or otherwise are able to legally contract.
- Income: You don’t have to work full time or make a certain income in order to get a credit card, but creditors like to see that you have assets, an income source, or in the case of stay-at-home spouses who don’t work, access to steady income. In other words, if you don’t work but your partner does, a card issuer may take into consideration your partner’s income.
- Debt-to-income (DTI) ratio: Credit card issuers measure your ability to make monthly payments and repay debt by comparing the amount of debt you carry each month with your monthly income. Card issuers prefer borrowers with lower DTIs because it means you’re more likely to make monthly payments on time. A low DTI often equates to a lower interest rate.
Tips and Strategies
These tips can increase your chances of getting approved for a credit card with a low interest rate:
Shop around: Don’t apply for whatever credit card offer lands in your mailbox. In fact, applying for too many credit cards at once can have a negative effect on your credit history. Research options online or with your financial institution so you can score the best interest rate and terms, and then apply for that card. Your financial institution is a good starting point.
Maintain a good credit history: Card issuers like to see a history of on-time payments. You’re more likely to get a card with a low interest rate when your credit record shows that you’re good at managing your money.
Watch your debt load: Carrying too-high balances on other credit cards can hurt your credit score and your chances of getting another credit card.
Don’t have too many credit cards: Card issuers may view too many open lines of credit as a financial risk.
If you can’t qualify for a credit card on your own because of your age, income or a poor credit history, you may need someone, such as a family member, to co-sign for a credit card. This co-signer vouches that you’ll pay off the debt as promised. He or she also takes on equal responsibility for the debt. In other words, if you fail to make your credit card payments, your co-signer legally has to make them. A late or missed payment will negatively affect your credit score, as well as that of your co-signer.
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