Finding the right credit card would be much easier if consumers could know ahead of time which ones they would and wouldn’t be approved for.
But getting approved relies on in-depth consumer information and meeting internal standards, said Leslie Tayne, head attorney at debt relief firm Tayne Law Group.
“Credit card issues don’t guarantee approval because they need to see the consumer's full financial profile before giving a consumer the green light,” Tayne told The Independent in an email.
“Internal underwriting standards play a role, which means that each lender has its own criteria for determining how much risk they are willing to take on and which applicants are the best fit for their products.”
Though credit card issuers don’t guarantee approval, they provide important tools that can make the process more predictable.
Predictive power
Credit card issuers will occasionally mail or email potential customers with pre-approval offers. These notices typically let the recipient know they’ve been pre-approved or prequalified for a certain credit card.
One of two things usually happens behind the scenes to trigger a credit card pre-approval, according to credit bureau Equifax:
- The issuer builds a profile of the credit requirements that best fits a credit card, then sends that profile to a credit bureau and asks them to provide a list of consumers who match the checklist
- The issuer sends a list of customers to a credit bureau and asks which ones would meet a certain card’s credit criteria.
Getting one of these notices is the single most important predictor of whether you will get a credit card, Tayne said.
“Pre-approval/pre-qualification is as close as a consumer can get to a guaranteed approval from a credit card lender,” she said. “Being pre-approved/prequalified basically means that the lender has preliminarily reviewed the financial information about you that’s available to them, and they believe you’d be a good fit.”
Application aches and pains
But even if a consumer receives a pre-approval notice from a credit card issuer, it’s not a guarantee they’ll get the card if they apply. Pre-qualifications are based on a soft credit check, Tayne said, which is a preliminary scan of a consumer’s financial information.
If someone applies for a card, the issuer will do an in-depth analysis of the applicant’s credit history. If any warning signs pop up that weren’t visible in the soft inquiry, it could lead to a denial, Tayne said.
“Things that could negate approval after being pre-approved include a recent dip in your credit score, taking on large sums of new debt, significant shifts in income, poor repayment history (especially if it’s recent), and/or any errors on the pre-approval application,” Tayne said.
Banking on it
In some cases, banks will provide a credit profile for the cards they offer.
For example, Capital One pairs each card on its website with the credit rating needed. Consumers can use a search filter that shows “credit builder” cards meant for applicants with low credit scores who may have a hard time finding an issuer that will approve them.
Discover’s credit card site also gives users the option to filter for credit building cards. It provides a quick pre-qualification application that asks for basic information, such as address, salary and phone number. The process doesn’t impact credit scores and provides a list of cards the applicant might be approved for.
These features make Capital One and Discover helpful for those with lower credit scores, Tayne said.
“Capital One and Discover often have cards with lower qualifications, so these lenders can be a good place to start for borrowers with lower credit scores or those who are just starting to build credit,” she said.
Credit scores are typically rated in five bands, according to FICO, a leading credit scoring model used by lenders:
- Exceptional: 800 or above
- Very good: 799-740
- Good: 670-739
- Fair: 580-669
- Poor: Below 580.
Checking credit scores before prequalifying and applying helps consumers know which cards are the best fit for them. Looking over their credit reports can also reveal any errors that may be hurting the consumer’s score.
“If you find [an error], take it up with the corresponding credit bureau,” Tayne said. “This can lift your score quickly if the error is legitimate, which will increase your odds of being approved for a new card.”
This article is sponsored by Credit Karma. We may earn a commission if you engage with their services using links in this article.
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