CREDIT CARDS 101: How Often To Apply For Credit Cards
There are so many credit cards out there to choose from with incredible signup bonuses, perks & benefits and long-term rewards. And of course, many banks have their own credit card application rules (like Chase, Citi and American Express). So this video will help you get a general idea of when to apply for a credit card.
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FIRST OF ALL…
For this video, we are speaking IN GENERAL so you can increase your chances of approval without destroying your credit score. Therefore this is not a hard rule.
THE MOST IMPORTANT FACTORS determining your odds of credit card approval are:
– Credit Score
– Credit Factors
– Income
CREDIT SCORE
Your credit score is the numerical expression representing your level of creditworthiness. Most credit scoring models have a range of 300 – 850. The higher your score, the better.
CREDIT FACTORS
Payment History (35%)
Utilization Ratio (30%)
Length of Credit History (15%)
Mix of Accounts (10%)
New Accounts (10%)
In general, to increase your credit score follow these best practices related to the credit score factors above:
– Always pay on time and in full by the due date on your credit card statement
– Don’t max out your credit cards and avoid racking up high balances. The sweet spot is to use anywhere between 10% – 30% of your available credit lines, both on individual cards and across all cards.
– Keep your early card(s) open long term if possible, especially if it’s a credit card with no annual fee. The longer your credit history, the better your score tends to be.
– Credit card companies and financial institutions like to see that you’re responsible with a variety of different financial products. So it can be helpful to have a few credit cards and/or an auto loan and/or a mortgage and/or a personal loan, etc. That said, this refers to your ‘mix of accounts’ and only contributes 10% of your score. Only get the financial products you need; you can go a very long way with 1-2 credit cards and nothing else.
– Don’t open new cards frequently in a short period of time. This adds hard inquiries to your credit report and lowers your average age of accounts, both of which lower your score.
INCOME
On the whole, the higher your income, the higher your credit lines may be (and vice versa). That’s because banks view your income as part of their risk assessment criteria. Higher incomes make banks more comfortable that you’ll be able to pay off your balances, which is why they’ll often extend greater buying power to you in the form of higher credit limits.
SO…
If you want to INCREASE your chances of getting approved for new credit cards WITHOUT tanking your credit score from things like too many hard pulls / inquiries, too many new accounts, insufficient length of credit history (aka average age of accounts, AAoA)…
THEN…
IN YEAR 1 I recommend getting 1-2 credit cards a few months apart, likely secured credit cards. Your focus in this stage is to build credit.
IN YEAR 2 & BEYOND you can get 1 new credit card every 3 months. Your focus in this stage is more on rewards (e.g. credit card signup bonuses, credit card rewards, credit card benefits, etc.)
PRO TIP: If there are Chase credit cards that interest you, focus on those first due to the Chase 5/24 Rule. Then you can branch out into other credit card issuers like Citibank, Bank of America, Capital One and others.
CREDIT CARDS FOR YEAR 1: Credit Cards to Build Credit / Best Credit Cards for Beginners
– Discover it Secured Credit Card
– Capital One Secured Mastercard
– Citi Secured Mastercard
– Bank of America Cash Rewards Secured Credit Card
– OpenSky Credit Card
CREDIT CARDS FOR YEAR 2 & BEYOND: Credit Cards After Building For 1 Year
– Apple Card
– Chase Freedom Flex
– Chase Freedom Unlimited
– Chase Sapphire Preferred Card
– Amex Blue Cash Everyday
– Bank of America Cash Rewards Card
– PayPal CashBack Mastercard
– Citi Double Cash Card
– Capital One Quicksilver Card
– Capital One Savor Card
– Capital One Venture Card
Disclosure: This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as CreditCards.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. Mark Reese is not a financial advisor.
#creditcards #creditcards101 #creditcardsforbeginners
