If you’ve thought about getting a credit card lately, then you’ve probably read up on credit scores. Your credit score is a way of measuring how reliable you are when it comes to borrowing money. Lenders — such as credit card companies — want to feel confident that you’ll be able to make payments on your debt, including your credit card debt. If you have a high credit score, then you’re probably safer to lend to, and therefore safer to give a credit card too. However, if you have a low credit score, then you may only be able to get a credit card under certain limited conditions, if at all.
There is no defined credit score floor for getting a credit card. It varies from company to company, and from credit card to credit card. A generally accepted lower limit for getting a basic credit card is a credit score of 600. However, there are exceptions to this rule, such as secured credit cards or getting a credit card cosigner.
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Getting Approved: Credit Score Requirements vs Other Factors
Your credit score plays a big role in determining what credit cards you can get, but it’s not the only factor. Credit card companies will consider other things on your credit report, such as your existing loan balances and your history of making on-time payments. Even with a high credit score, there may be limits on the kinds of credit cards that you can get and vice versa — even if you have a low credit score, you may be able to redeem yourself through other factors that credit card companies consider.
Credit History
One of the most important parts of your credit report is your credit history. This is a detailed record of every payment that you’ve ever made on a loan, whether it’s a student loan, a mortgage, or even just a credit card payment. This is also one of the first things that a lender will look at after your credit score.
Generally, if you have a long history of making payments on-time, that will count very strongly in your favor. Maybe even more strongly than overall credit score, if your history is long enough and consistent enough. Credit card lenders will feel very comfortable taking you on as a customer if you’ve shown that you can handle debt responsibly and make your payments on-time.
Total Income
Your total income is another important factor when it comes to qualifying for a credit card. Even if you have a bad credit score, a high income is a good sign that you’ll be able to repay debt up to a certain point without too much trouble. A high income also gives you more wiggle room to make mistakes with your debt, meaning that lenders might be less likely to suffer if you do mess up.
Conversely, even if you have a great credit score, a low income might make it harder for you to get some premium credit cards. High level credit cards often have a very high credit limit, which lenders will be less likely to grant to you if it makes up a significant portion of your overall income.
Although your income doesn’t directly affect your credit score, it can still play a role in determining which credit cards your are eligible for.
Debt to Income
Total income plays an important role in determining if you meet the minimum requirements for a credit card, but even with a high total income, you could still be denied. If your debt-to-income ratio is very high — meaning that you have a lot of debt compared to your overall income — then you could be denied for a credit card, even if you have a good credit score. A high debt-to-income ratio is a sign that you may be living beyond your means, which could place you only a few bad days away from a financial emergency.
Alternative Credit Scores
The FICO credit score (which has long been synonymous with the term “credit score”) is seen as an outdated way of measuring credit worthiness by some people. For this reason, some alternative credit score systems are beginning to crop up.
VantageScore is an alternative credit score that breaks away from the traditional credit score algorithm. It uses advanced mathematics to try to paint a more reliable picture of your credit worthiness than the traditional FICO model.
UltraFICO is a new development on the older FICO system. It will take your old FICO score into account, but it will add on additional considerations such as late payments on bills or keeping a minimum balance of $400 in your bank account. UltraFICO could make you appear more desirable as a borrower than the old FICO system if you’re someone who likes to pay with cash or check more often than credit card.
What Credit Score Is Needed Depends on the Credit Card
Ultimately, the most important factor in determine whether or not you’re likely to be approved for a credit card is the card itself. There are variety of different cards that are available at different credit score levels. If you find yourself being denied for a credit card and you don’t understand why, then it may be because you’re applying for a card beyond your means.
If you have a lower credit score or there are other factors that make you a less desirable borrower for credit card companies, then you should try to apply for credit cards that have:
- A higher interest rate
- A lower credit limit
- Fewer rewards
These are the features that tend to make credit cards more powerful, and therefore harder to get. A higher interest rate on a credit card will help lenders guard against the potential for a borrower to miss payments of default on their debt. A lower credit limit has a similar effect, preventing unreliable borrowers from taking on too much debt from the credit card company. Finally, credit card rewards are something that the company has to pay for, which they won’t want to do if a borrower is unreliable with their own payments.
Even if you don’t meet the requirements to get the credit card of your dreams right away, you shouldn’t give up. You can apply for a more basic credit card with a higher interest rate and fewer perks and then pay off that credit card to improve your credit score. Once you have a higher credit score, you can try again for the card that you really want or you can negotiate with your credit card company for better terms.
If you get rejected for a credit card, then be careful about applying too often. Try to get an idea for what you can reasonably expect to get in a credit card and then apply for a more basic card on your next time around. If you just try to apply for every card that you can find, then you’ll actually end up hurting your credit score, which will only make it harder for you to get a credit card in the end.
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