How to apply for credit cards

Which card to ask for based on where you are

• Under 580: secured card: you deposit an amount and that is your limit; approval is much more likely
• 580 a 669: secured or basic cards; limits are low and sometimes there is an annual fee, but they build history
• 670 a 739: no-annual-fee cards with basic rewards
• 740 or higher: the best on the market: welcome bonuses, better rewards, and better terms

The secured card is not a punishment. It reports to the bureaus like any other and is a safe way to build history. With good management, many convert to a regular card and return the deposit.

What to check before applying

• That it reports to all three bureaus. If it does not report, it does not build history.
• The annual fee: at the start, no fee or a low fee is best.
• Whether it allows a limit increase without a new hard inquiry.
• On secured cards, whether it converts to a regular card over time.

Why applying for several hurts you

Each application generates a hard inquiry on your report, and hard inquiries:

• lower your score a little each,
• stay visible for about two years,
• raise suspicion: five applications in two weeks signal to the bank that you are seeking credit urgently, and that increases denials.

The most common mistake: you are denied a card, apply for another the same day, get denied, apply for a third. In the end you have three hard inquiries and no card. If you are denied, stop: ask for the letter with the reasons, address what it says, and try again in a few months.

The right way: one card at a time, with at least three to six months between applications, and looking for those that offer pre-qualification with a soft inquiry.

The number that matters most: utilization

It is not how many cards you have, but how much of your limit you are using. Under 30% is the general guideline and below 10% is usually better. Example: with a $1,000 limit and $900 of debt you are at 90%; even if you pay on time, that number weighs on your score.

Ways to lower it without spending more:

• Pay before the statement date, not just before the due date: the bank reports the statement balance.
• Ask for a limit increase without spending more.
• Do not close old cards: you lower your total limit and raise utilization.
• Spread the balance across several cards instead of leaving one maxed out.

How to use it to build history

• Use it a little, but use it. One small purchase a month is enough.
• Pay the full balance. Leaving a balance does not improve your score, it only generates interest.
• Never fall behind. Payment history is the factor with the most weight, and a 30-day late payment can stay for up to seven years.
• Be patient. Account age counts: a five-year-old card weighs more than three new ones.

Before applying for anything, review your report. If it has errors or wrongly reported accounts, it is best to take care of them first: applying with a messy report can bring a denial or worse terms, and each denial leaves a hard inquiry.