Credit Card Applications

The Application Process

What happens when you apply for a credit card? Do those pre-approved offers change the process any?

Whether by pre-approved offer or by application, probably the first thing the lender checks is your credit score. If you have a bad score, you won’t even see the offers in your mailbox.

All applicants should also expect that their credit report will be reviewed. Your credit report contains a lot of information, much of which lenders find vital, including your ability to meet outstanding debt and handle additional debt.

Banks use various criteria to create their own proprietary formulas.

Banks now consider such things as late payments to other lenders, utility companies or even your municipality for late payment of tickets or library fees.

Your employment and criminal history will effect offers of credit, as will missed payments, charge offs and bankruptcy.

The banks like to see long term relationships with other lenders and use of only a portion of your already outstanding credit.

If you’re looking for one of those low or zero APR deals, the inspection will be more careful. Only the best borrowers will qualify.

If your credit score isn’t stellar expect higher interest rates and fees and shorter grace periods.

No matter what your score, thoroughly review of all terms and conditions of the credit card offer. If you can compare different banks’ offerings looking for the lowest annual percentage rates you qualify for, the length of the grace period, transaction and annual fees, whether rates are applied over multiple billing periods and whether the dreaded universal default clause is included.

Read carefully. Look out for the pitfalls and be a very careful shopper.

One way to protect yourself is to use a consumer friendly bank. You can deal with lenders who have a record of treating their customers fairly.

There is so much competition in this field and so many people already have multiple credit cards, that there will always be a lender with a better deal. So take your time and shop around. If you don’t like what you see in one offer, odds are you’ll find a better one tomorrow.

Of course, government has to have its say. First the Federal Reserve mandated changes in the way banks could operate. The new regulations were to be put in place in July 2010.

The Congress then stepped in and speeded up the time table by a few months.

You can read about the changes in New Credit Card Regulations.

There is quite a bit of dispute as to whether card borrowers will be helped or hurt by these regulations. My guess is that, since they substantially increase banks' costs, they will hurt more then help.

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