While applying for a credit card doesn’t have to be complicated, it can come with certain risks. After you’ve applied for a card, the credit card provider will look at your income, credit history and the documents you’ve provided in your application to determine whether you’re a high or low-risk applicant. Essentially, they’re looking for signs that demonstrate that you’re a low-risk borrower that has the ability to repay your balance.
Use this guide for 12 tips to increase your chances of credit card approval, including what to do before you apply and submit your application and mistakes to avoid when requesting a new credit card.
What's in this guide?
What to do before you apply for a new credit card
The pre-application process is considerably more important than the act of applying itself. While it may take only 15 minutes to fill out the form, getting your affairs in order so that you’re ready for the provider’s assessment of your application will take a bit more time and preparation. Lenders want to know if you’re able to repay your debt. That’s why they need your personal and financial information, including annual income, employment status, Social Insurance Number (SIN) and your credit score. Based on the information they receive, the lender will decide whether to approve your credit card application and what your interest rate will be.
Tip #1. Take your time
It’s never a good idea to rush into things, and it is your right as a consumer to assess the bank before it assesses you. Don’t jump at the first credit card deal you see. Instead, spend some time comparing your credit card options so you can find a card that suits your financial needs and spending habits.
Tip #2. Know your needs
There are many different types of credit cards on the market that suit a variety of cardholders. Before you begin your search, spend some time considering what you want, need and can afford with your next credit card.
- If this is the first credit card you’re applying for, you might want to apply for a student credit card or a no annual fee credit card. These types of cards can help you to keep costs to a minimum while you learn the ins and outs of having a credit card.
- If you’re a frequent spender who regularly repays their balance in full and on time, a rewards credit card could help you reap the benefits from your spending.
- If you struggle to pay your balance off each month, a low interest rate credit card could help you keep costs down.
- If you’re struggling to repay an existing debt, a balance transfer credit card with a 0% or low promotional offer could help you get your finances in control.
Tip #3: Compare your options
Once you’ve decided what type of card you want, it’s time to begin comparing your options.
What do I need to compare?
- Interest rates on purchases, cash advances and balance transfers
- Annual fees
- Interest-free periods
- Rewards programs including the partnered program, earn rates and how you can earn and redeem points
- Complimentary insurances including travel insurance, purchase protection and extended warranty coverage
- Additional cardholders and whether additional cards come with a fee
- Extra benefits such as concierge services and airline lounge passes that’ll help you offset the costs of the card
Comparing your credit card options will help you narrow down your search and ensure that you’re selecting a card based on an informed decision.
Tip #4: Check the eligibility requirements
You’ll need to meet the eligibility requirements to be approved for any credit card you apply for. Make sure you confirm that you meet the criteria before you submit your application, as rejected credit card applications can have a negative impact on your credit score.
Credit card eligibility requirements
While requirements can differ between cards, they usually include:
- Age. Be at least 18 years of age, or the age of majority in your province or territory.
- Residential status. Be a Canadian citizen or a permanent resident with a valid Canadian address.
- Good credit history. You’ll need to have a good credit history with no defaults or evidence of bankruptcy.
Tip #5: Check and improve your credit rating
Banks typically use a credit rating system when assessing your eligibility for the card and card limit in question. Based on your credit history, repayment habits and current credit lines, the provider will work out how much you can safely borrow. This information is available to providers whenever you apply for any form of credit, but also to you at any time.
You can request a copy of your credit report before applying from one of the two credit bureaus in Canada: Equifax and TransUnion. Doing this can allow you to correct any possible errors on your report and see exactly what the bank will be seeing when they assess your application. If the report is less than ideal, it may be wise to delay your application and spend some time improving your credit score to increase your chances of future card approval.
Tip #6: Lower your credit utilization ratio
If you already have a credit card balance, it’s wise to pay off your existing balances before submitting a new credit card application. This is because having a high debt utilization ratio is a poor indication of credit-worthiness and reduces the likelihood of a successful application.
- To calculate your ratio, divide the total current balances on your cards by their total limits.
How to lower your credit utilization ratio
For example, if the limits on your three cards are $5,000 each, and you have a $4,000 balance on each of them, your ratio is $12,000/$15,000 = 80%. A healthy ratio is typically 30% or less. If you’re struggling to repay your debts because of high-interest rates, consider consolidating your debt with a 0% balance transfer credit card.
Tip #7: Bank with your credit card provider-to-be
Opening a savings account or debit account with the bank you’re applying for the credit card with could help with the application process.
- Firstly, it will significantly speed up your application, because you’re an existing customer and the bank has already verified that you are a legitimate customer.
- If you have a chequings or savings account with them where your salary is deposited monthly, it proves that you have a regular income.
- If you apply online via internet banking, your application will speed up even more because your details will usually already be pre-populated on the forms.
As long as you meet the eligibility requirements, existing customers can sometimes get approved quicker than other applicants without the hassle of providing further documentation.
Compare credit cards
Tips to remember during the application process
Once you’ve done research, checked the eligibility requirements and selected a card, you can apply for your chosen credit card. While filling out your application, keep the following tips in mind:
You’ll be asked to provide a lot of information during your application including addresses, contact numbers, current and previous employment, salary, outstanding debts and monthly expenses (just to name a few). While it might seem like a lot of information, it’s important to fill it out correctly and double check it before submitting the application.
Mistakes on your application could slow down the process or result in a rejected application. For instance, if you omit details of an outstanding balance and the bank later finds it on your credit file, they could think you’re trying to hide the debt from them and could decline your application.
Tip #9: Organize the required documents>
As well as eligibility requirements, you’ll be required to provide a number of documents with your application. Supporting documents you’ll typically be asked for include your passport, driver’s license, proof of residential status, recent paycheques and your last tax return. Make sure you confirm what you need to provide before you start the application to ensure a swift and successful application.
Tip #10: State your actual income
This is no time to be modest or to exaggerate your income. Deflating your income may sabotage your application by reducing the bank’s opinion of your ability to finance a debt. If you have multiple sources of income (such as from part-time employment, freelance jobs or government payments), make sure to include these details. Fabricating or inflating your income, on the other hand, is considered fraud and punishable by law.
Mistakes to avoid when applying for a credit card
Aside from the tips to follow before and during your application, the following are common mistakes to avoid if you want to increase your chances of approval.
Tip #11: Don’t apply for multiple cards at once
You may be tempted to apply for a second card just in case your first one doesn’t get approved, but don’t. Each credit inquiry that a provider makes about your credit history leaves a new mark on your credit file. If you apply for many cards at once or during the same period, it would appear to every subsequent provider that you have a lot of debt, even if that isn’t true. This could leave you in a vicious cycle of applying for credit cards and not having them approved.
In fact, some banks will automatically reject your application if you’ve recently applied for a credit card. It’s best to apply for one card, and if rejected, wait a few weeks or months before applying for another.
Tip #12: Be careful with balance transfers
In order to do a balance transfer, you’ll have to turn to a provider that you don’t currently bank with. A bank that you currently do business with will not compete against itself and give you a balance transfer offer, which means you will need to turn to a provider who you don’t have a history with. You can learn more about balance transfers in our guide here.
Applying for a credit card is a relatively simple process and can take as little as 15 minutes. However, if you don’t do your research beforehand, ensure you meet the eligibility requirements and prepare the necessary documents, you’ll reduce your chances of approval and increase the time it takes to complete your application. As long as you follow the above tips, you should have no trouble applying for your next credit card.
Two main questions lenders ask
- Are you likely to repay the credit?
You may have a great income and lots of money to repay the loan, but if your credit history suggests you neglect your debts or pay them late, then very few lenders will look favorably upon you unless they’re able to secure their loan with some type of security.
- Are you able to repay the credit?
Lenders need to see that you have a regular income so your repayments can be easily covered. If you don’t have a regular income, some lenders may deny your application, even if you have a good credit score.
Specific factors lenders consider
With those questions in mind, the following factors are crucial in determining the success of your application.
- Your credit score
- The number of times you’ve defaulted on a loan
- Any bankruptcies on your record
- The number of times you’ve applied for credit in the past year
- Your annual income
- Your current debt load as well as your debt-to-income ratio
- Your history of borrowing and repaying
- Any missed or late payments on your record
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