8 Mistakes To Avoid When Applying for a New Credit Card
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Written by
Jeanine Skowronski
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Edited by
Amen Oyiboke-Osifo
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Reviewed by
Jasmin Baron
Applying for a new credit card feels straightforward, given that you can do so with some personal information and a few clicks. But there are nuances to consider, especially if you’re in the market for a premium credit card.
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Certain faux pas can hurt your approval odds, lead to subpar terms or even lower your credit score. Here are eight mistakes to avoid when applying for a new credit card.
Forgetting To Check Your Credit Report
Card issuers review your credit report as part of their application process, and errors or past missteps can lead to denial or unfavorable terms. As a result, it’s a mistake not to check for these items before filling out a new credit card application.
Fortunately, you can request free weekly online credit reports from AnnualCreditReport.com.
Ignoring Your Credit Score
The best credit cards across all spending categories require good-to-excellent credit, so it’s instrumental to know exactly where your numbers stand — and if your score isn’t particularly creditworthy, you’ll want to make improvements before applying for top products.
To increase your creditworthiness, “always pay your bills on time, keep your balances low, and avoid too many credit applications,” said Steve Azoury, chartered financial consultant and owner of Azoury Financial.
Applying for Too Many Cards at Once
New credit accounts for a small portion of your credit score, and too many credit card applications in a short period can work against you. For starters, each application can generate a hard inquiry on your credit report, which dips your credit score.
Beyond that, a lender might view the simple act of applying for too much credit in a short timeframe as a risk, regardless of your overall creditworthiness.
Credit card issuers, in particular, are often reluctant to approve applicants who have applied for multiple cards within a set period, as they view it as a sign of churning — i.e., applying for numerous cards solely to receive a welcome bonus.
Choosing a Card for Its Welcome Bonus
Welcome bonuses — extra points, miles, or cash back for spending a set amount in your first few months as a cardholder — are certainly enticing. But the most lucrative ones often come with higher spending thresholds and steep annual fees.
Plus, these offers, by nature, are one-and-done, meaning you won’t get the same opportunity to earn bonus rewards in your second cardholder year.
As a result, you’re best served by assessing a card’s full benefits and selecting one that suits your lifestyle and spending habits in the long term. For instance, if you suspect you might not use all of a pricey card’s perks, you can opt for a top no annual fee credit card instead.
Going in With High Debts
In addition to your credit score, issuers will look at your debt-to-income ratio — that is, how much money you earn against how much you owe your creditors — when you apply. If this ratio is high, they might deny your application.
Similarly, you could face an unexpected denial with an inflated credit utilization rate, which measures outstanding balances against your total credit limits.
Lenders generally prefer a debt-to-income ratio below 36% and a credit utilization rate under 30%. Aim to achieve these goals (the lower, the better) by paying down big balances before applying for a new credit card.
Picking the Wrong Card Category
Credit cards serve multiple purposes. Some help you build credit, while others allow you to rack up rewards. Balance transfer or low-interest credit cards help you pay down debt or avoid exorbitant annual percentage rates (APRs), at least for just a short window of time.
Few cards let you do all of these things at once, and ones with multiple features or use cases often require stellar credit profiles. You can minimize the odds of a credit card rejection and its associated consequences by identifying the best category for you before applying.
For instance, if you have no credit history, you may need to start with a top-secured or student credit card, which has less stringent credit requirements.
Skipping the Comparison-Shopping Process
“Remember, you’ll want to shop and compare for the best deals before applying,” Azoury said. That’ll help you pinpoint standout offers, assess card fitand limit credit inquiries during your card search.
Most issuers advertise a card’s key terms, including rewards rates, annual fees, required credit threshold, and APR ranges, on their websites.
If you’re most concerned about approval odds, you can explore pre-approval or pre-qualification. That’s where an issuer conducts a preliminary review and lets you know whether you’re a good candidate. Pre-approvals aren’t guaranteed, but they typically only require a soft credit check and won’t harm your credit score.
Winging the Application
Credit card applications aren’t complex, but you have to provide information about your income, employment, housing costs and sometimes banking account details. Errors or insufficient information can lead to a denial or undesirable offer, so it’s a good idea to prepare in advance.
“To get the best shot of lower interest rates and terms, have all of your important information available, including income patterns, employment history, and other credit you have already,” Azoury said.
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