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.
It is important that you understand your credit score as it will affect your ability to get a credit card - you can find out more about your score and obtain a free credit report. 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.