There’s a first time for everything including credit card application. After you’ve done some research and comparison, you finally found the right one for you however, you ask yourself, am I eligible enough to have one?
A credit card can make dealing with your monthly cash flow and tracking expenses easier when used responsibly. You can also pay back all of your monthly charges for free, all thanks to credit card grace period. There are also credit cards that grant rewards points and pay cashback.
If you are an adult, got a steady job and a good credit score, it is understandable if you want one
Although most people think that it is all about credit score and income, there are still other factors to consider to know whether you are eligible for approval or not.
Credit Card Eligibility Factors to Consider
- Credit Score
First on the list and probably one of the fundamental factors to consider is your credit score. Your credit score acts as an assessment of how well you’ve managed your previous debts. It ranges from 300 to 900. The better odds of getting approved is to get your credit score closer to 900.
In general terms, to be considered eligible for most credit cards, you’ll need to have a credit score of at least 660 and a significant score of at least 725 for some high-value rewards card and unsecured card.
Your credit score can be determined based on the amount you owed previously. Banks and lenders measure how much you borrow in relation to your credit limit. It can also be based on your payment history which shows how you reliably pay on time.
Bank and lenders also review how you manage your debts based on the type of credit you previously have and the length of your credit history. The longer your experience properly managing multiple types of credit accounts, the better.
- Income and Employment
Banks and lenders include income and employment information as one of the requirements when applying for a credit card. It serves as proof that you earn a sufficient and steady income.
Although it depends upon the credit card application requirement and its terms and conditions, there are some instances that you may not need to earn a specific minimum requirement. Either required or not, the amount of your earnings will directly factor into your eligibility.
The same goes for employment status. Technically it is not a pre-requisite for getting approved as long as you can prove that you have access to at least a similar form of regular income such as a scholarship or allowance. However, you have to be reminded that you may need to provide additional documentation and the processing time for the application may take longer than usual. In some instances, you may only be considered for some entry-level credit cards.
- Credit Report History
Most cards require applicants to have an established credit history. Although you can predetermine what offers you may take advantage of, some of the best offers existing today may require up to a minimum of seven years of good credit history.
Most banks will directly ask you if you experienced filing for bankruptcy within the past seven years. If you happen to do so, it will usually result in an R9 rating in your credit report and you’ll be automatically eliminated from getting any type of conventional credit card.
On the bright side, this rating will not remain on your credit report as long as you make some meaningful actions to settle your debt and rebuild your credit.
An option exists for people who don’t have a credit history or have bad credit and that is to look for a secured credit card. Generally speaking, you can get a credit card with poor credit because these cards require the applicants to make a deposit into a bank account upon opening it.
- Age and Residency
To be able to qualify for a credit card in Canada, personal details such as age and residency are also other things to consider. The minimum standard is that applicants must be either 18 or 19 years of age depending on which province they live in. Basically, an applicant must be legally an adult.
18 years old – Quebec, Manitoba, Alberta, Ontario, Prince Edwards Island, and Saskatchewan
19 years old – Northwest Territories, Nova Scotia, Nunavut, British Columbia, Yukon, and Newfoundland and Labrador
Applicants also must be citizens or have permanent residency in Canada. The choice of credit cards may be more limited for people who are new immigrants or have temporary residence status.
- Credit Rating
Once banks have the access to your credit report, they may use it to get a read on your credit rating. A credit rating is a declared assessment of a borrower whether he or she is eligible to receive a credit or financial obligation.
It is presented as a code which is a combination of a letter and a number that represents how you manage certain individual credit accounts. The letter represents the type of credit or loan while the number represents a variable scale from 1-9 that records how often you make on-time payments, 9 being the worst rating and 1 being the best.
For example, M1 where M stands for Mortgage or R9 where R stands for revolving credit.
Underwriting is a process done by banks and lenders to evaluate the eligibility and risk of credit card applicants. It is done mostly via bank-to-bank or card-to-card to look into the applicant’s recent opening of credit cards for example or the total of credit cards you have on your credit file.
The journey of getting a credit card will not stop once you have been declined. It will take a lot of effort and it will not be easy. But one thing is for sure, there will always have ways to improve these key factors to prevent it from happening. Start today.