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Anatomy
of a Credit Card Application
Credit card applications look straightforward --- you just fill
out the form and they send you a card, right? Yes, except sometimes
you fill out that form and they turn you down --- or give you
the card on terms you're not thrilled with.
Why?
Well, just like a resumé shows employers your work history,
a credit card application asks for your financial resumé.
Your past experiences count for a lot. Let's look at a typical
credit card application line-by-line to see what credit card
issuers look for when approving or rejecting an application,
as well as how your answers may affect your interest rate, credit
limit, and more..
As
an example, we'll use the application for a very popular credit
card --- the Disney
Rewards Visa.
STEP
1: Weeding Out Bad Credit Customers
The first
thing we see on the application is this section:
Application
Information
Before
completing the application, you should be able to answer "Yes"
to the following statements by checking the boxes:
- Yes,
my credit history is clear of bankruptcy.
- Yes, my credit history is clear of seriously delinquent
accounts.
- Yes, I have NOT been denied credit by Chase within the last
6 months.
Clearly
the issuer does not want you if you have seriously bad credit.
If you do, this card is not for you. Unfortunately, you may
be stuck getting one of the higher-interest, higher-fee unsecured
credit cards or secured
credit cards for those with poor credit histories. However,
if you said "yes" to those questions, you can proceed.
STEP
2: The Basics
Next
up...your basic personal information:
Name:
Residential
Address:
City,
State, Zip Code:
Home
Phone:
Lived
There: X years X months
One
thing of note here: Credit card issuers are looking for stability
in your life. One sign of stability is if you've lived in the
same place for an extended period of time. If you have, banks
treat you as less likely to skip out on your debts. If you're
moving every 6 months, it may signal that they'll have a hard
time tracking you down if you decide not to make your card payments.
(Obviously we all move at some point in our lives; being fairly
new to your residence does not disqualify you from getting a
card, but it could hurt if other factors also look shaky.)
Next
up:
SSN
(Social Security Number):
Date
of Birth:
You
almost always need to give your Social Security Number and date
of birth if you're getting a loan. This is part of how a credit
card company or bank checks your credit history, and also confirms
that you are who you say you are.
Next:
Mother's
Maiden Name:
E-mail
Address:
No
need to be suspicious there. Your mother's maiden name is used
as a security feature, so if you call or otherwise follow up
on your application, the card company can confirm that you really
are you. The e-mail address is used just to confirm that your
application went through --- however, check the bank's privacy
policy to see if giving your e-mail address is an automatic
"opt in" to advertisements from the bank, or even
ads from other companies that the issuer partners with. If you
don't want that junk, you may have to contact the issuer later
on to request your e-mail address not be used for marketing
purposes.
STEP
3: Your Job
Now
you see this section:
Please
Tell Us About Your Job
Position:
Employer:
Worked
There:
Alternate
Phone:
If
you're unemployed, you're not likely to get a credit card. Again,
issuers are looking for stability on your credit card application
--- they not only want to know that you have a job, they want
to feel comfortable that you've had the job for a while. So,
the longer you've been with your present employer, the better.
Likewise, if you are self-employed, the longer you've been making
it on your own, the better. (Note: The "Alternate Phone"
part kind of stumps us; it may be a way to check up to make
sure you really have the job you're claming to have.)
STEP
4: Your Financial Information
This
may be the most important part of your credit card application:
Please
Provide Some Financial Information:
Annual
Household Income:
Please
select the type of bank accounts you have:
Select
Residence (Rent or Own):
Monthly
Rent or Mortgage:
You
can probably guess what's going on here. The card company wants
to know how much you're making and how much of your money is
already spoken for by a mortgage or rent payment. Obviously,
more income is better than less income, but it's even more important
that you aren't paying too large of a percentage of your income
toward housing. You may also score some points here if you have
multiple bank accounts, and if you own a home versus renting
--- again, these are signals of your stability, financial and
otherwise.
STEP
5: Incidentals
Looking
at this particular credit card application, there are also these
sections:
2nd
Cardholder
Balance
Transfer Option
Notes
on these... If you desire, you can have a second card sent for
someone else to use --- usually your spouse, maybe your older
son or daughter. Remember that if you are the primary cardholder
(your name's on the application), you are responsible for paying
the bill. So be sure you have a deep trust in whoever else you
let share an account with you. (You might not want anyone to
share an account with you, even if you do trust them.)
The
balance transfer option allows you to transfer balances from
other credit cards to the new card. This is especially attractive
if the new card allows you to transfer the balance at a 0% rate.
However, two caveats: (1) there is usually a one-time fee to
transfer a balance (in this case 3% of the balance, up to $75),
and (2) when you make payments to your card, the payments will
go toward the balances at 0% before the purchases you make at
the card's regular interest rate. (For more more information
on handling balance transfers correctly, go
here.)
STEP
6: Authorization and Submit Application
Nothing
to this part. Just read the bullet points on the application
that ask you to solemnly swear that your information is truthful,
then click the "Submit" button to send your application
to the issuer. In most cases, you'll know within a week or two
if you've been accepted. (Sometimes sooner.)
That's
it's! If you're ready, return to the IndexCreditCards.com home
page to apply for
a credit card.
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