Improve your chances of success when applying for a credit card with our carefully curated tips.
Looking for a new credit card? Maybe you’ve already chosen one and are about to dive into the application process. Either way, you’ve come to the right place. These tips that have been gathered over years of credit card comparison will guide you to the finish line with a greater chance of being approved.
The principal idea of the credit card application game is to show the bank that you are a low-risk customer, and that you have the capacity to repay any money you borrow. While these suggestions offer a sure advantage in helping you achieve that, no tips in the world can guarantee your approval. You will ultimately need to fulfil the eligibility criteria required by each card provider.
Before applying for a credit card
In reality, 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 bank’s assessment of your application will take a bit more time and preparation.
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’re offered over the phone because that’s usually not going to be the right one for you. Commit the time to doing research so that you can find the best deal for your specific needs.
Tip #2. Know your needs
Your purpose for this card is important when it comes to researching and choosing the best card for you. Your lifestyle and spending habits also factor into the criteria for your chosen card. If frequent flyer points are the main aim for you, you’d be looking for the best dollar to mile conversion ratio. If cashback is your goal, and you spend mostly on groceries, then you’d specifically want a card with the highest possible cashback rewards for that category. If you’re a frequent flyer, you’d want a card with a rewards program or no foreign transaction fee.
Tip #3: Compare your options
While looking at the credit cards on offer, you’ll need to study their fine print: what rates, fees and charges, interest calculations and interest-free periods apply to each card? How do these fit your needs? Will you be able to make prompt repayments so that you won’t be racking up interest each month?
Some of the popular cards you can start comparing include:
- Low balance transfer card
- Low interest rate credit card
- Rewards program credit card
- No annual fee credit card
You can start comparing credit cards and start filtering your options on the credit card finder homepage.
Tip #4: Check the eligibility requirements.
It is important that you apply for a card you have a good chance of getting. This is because your credit report gets a mark each time any lender checks on it to assess your application. You should minimise applications by being realistic about which cards you can get. For example, if you’re a fresh graduate with a low income, you’re not likely to be approved for the American Express Platinum card. If you have a bad credit rating, the bank will not likely approve you for the $20,000 credit limit you’re after.
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, they work out how much you can safely borrow. This information is available to lenders whenever you apply for any form of credit, but also to you at any time. You should request a free copy of your credit history before applying, so you can correct any possible errors on it 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 until a time when you’ve improved your credit report.
Tip #6: Lower your credit utilisation ratio
If you already have a credit card balance, it’s wise to pay off your existing balances before putting in that application. This is because having a high debt utilisation ratio is a poor indication of credit-worthiness and may hurt your application. To calculate your ratio, divide the total current balances on your cards by their total limits, e.g. if the limits on your three cards are $5,000 each, and you have $4,000 balance on each of them, your ratio is $12,000/$15,000 = 80%. A healthy ratio is typically 30% or less.
Tip #7: Bank with your credit card provider-to-be
This will be very beneficial to your 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. Secondly, if you have a transaction or savings account with them, where your salary is deposited monthly, it proves that you have a paying job and a regular income stream. If you apply online and do it via internet banking, your application becomes even faster because your details will usually already be pre-populated on the forms. Existing customers get approved more easily and quickly without the hassle of having to provide much further documentation.
Pro-tip: put all your available funds into your transaction or savings account because the bank is going to look at that balance when approving your credit limit.
Applying for a credit card
Once you’ve done your homework and come to a good decision about the most suitable card for you, and your mutual suitability for it, you are ready for the actual application.
Tip #8: Be careful with the details
It is crucial that you get all the details right—addresses, contact numbers, referee details, current employment, previous employment, salary, outstanding debts and monthly details. It’s a lot of data, but it’s imperative that you get them all correct, because you will be asked for supporting documents shortly after and any discrepancies will negatively affect your application. For instance, if you omit details of an outstanding loan in your application which the bank later finds on your credit file, they’ll think you were trying to hide it from them. Even worse, you could be charged with fraud in the event they believe you knowingly provided false information.
Tip #9: Organise the required documents
This one is a no-brainer. If you want your application approved more swiftly, gathering the required documents early would be a smart move. Supporting documents that may typically be asked for are things like your passport, driver’s licence, proof of age card, proof of residential status, etc. Other documents like your payslips may be required to prove your income.
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. You need to show them that you are making enough money to service your lines of credit, so be sure to list all income and other forms of income in your application, including all that tutoring you do in the evenings and your regular lecturing stint at the university. Fabricating or inflating your income on the other hand is plain fraud, and that’s punishable by law.
Mistakes to avoid when applying for a credit card
When it comes to your credit card application, there are some pitfalls to avoid, and you’ll do well to observe these rules:
Tip #11: Don’t apply for multiple cards at once or within a short period.
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 enquiry that a lender makes about your credit history leaves a new mark on your credit file for five years. If you apply for many cards at once or during the same period, it would appear to every subsequent lender 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. For example, Citibank states in its terms and conditions that your application may not be approved if you’ve applied for and been accepted for another Citibank offer in the prior nine months. Be aware that this may be the case for other lenders too.
Tip #12: Don’t apply for balance transfers between cards funded by the same bank.
Note that you can only transfer the balance of a card that isn’t funded by the same bank as your new card. This can be tricky because it’s not clear which bank funds what credit card. We’ve put together a short summary for you to make things easier:
Balance transfer criteria based on credit card issuer
|Funding Bank||Credit Card Brand|
|Bank of Queensland|
|Westpac||St.George, Bank of Melbourne|
Finally, it is sometimes possible to get a credit card even if you have defaults on your credit file. The type of default and amount determines how risky the bank perceives it. If you have significant savings, and the serviceability calculation works in your favour, there is a chance you could be approved with some banks. It’s worth chatting to the bank first to determine your chances before making any decision to apply.
We recommend that you do your own research in any case, bearing in mind the factors discussed above.