With banks more hesitant to lend than ever before due to the economic fallout from the coronavirus pandemic, potential credit applicants must understand the best practices to boost their chances of landing their next credit card or loan. Here are some simple steps to increase your approval odds when applying for a credit card amidst the COVID-19 pandemic.
Monitor Your Credit Score and Credit Report
Keeping tabs on your credit score is the easiest way to boost your approval odds in difficult financial times. While the COVID-19 pandemic isn’t necessarily the ideal time for a new credit card, tracking your credit can help reduce any cases of fraud or misreporting on your credit reports.
Observing your credit report is now easier than ever, thanks to the three major credit reporting bureaus: Equifax, Experian, and TransUnion. All three agencies are now offering one free credit report per bureau per week for the rest of 2020. Normally, consumers are only entitled to one report from each credit agency per year.
These reports are an excellent way to monitor changes to your recent credit history. They also provide insights as to where improvements are possible. Finally, they give some encouragement to consumers who can see their hard work paying off.
Get a Secured Credit Card
The easiest type of credit card to get is a secured card with very high credit card approval odds.. These cards differ from traditional credit cards in that they require a security deposit to open. The deposit acts as both the collateral for the loan and the credit limit.
Despite the deposit, secured credit cards look and act exactly as any other credit card does. You can use them to make payments anywhere the payment network (Visa, Mastercard, or Discover) is accepted. Secured cards are great for building credit – here’s why:
- Using the card for small purchases keeps the balance low and minimizes your credit utilization ratio.
- The low deposit minimum requirements (usually around $200) make them easily accessible for many Americans.
- They typically feature fixed interest rates on purchases (though you should always try to avoid carrying a balance).
- Some cards, like the Discover It Secured, offer the chance of an upgrade to an unsecured card offer after a period of time.
Pay All Your Bills on Time
Scoring models determine credit scores. The most popular model is the FICO Score. As many as 90% of lenders are known to use the FICO model, with the remainder using VantageScore. The most critical component of both scores, however, is the same – payment history.
Payment history accounts for more than a third of your credit score in both major models. Because this factor is so critical in making up your credit score, missing any payments can quickly weaken your chances of getting a new credit card.
It’s always best to pay your statement in full each month to avoid interest charges. For many Americans, however, that isn’t a reality – especially now due to the hardships stemming from the coronavirus. Always pay your minimum balance, however, to keep your accounts in good standing. It is a little step that reaps massive rewards over time.
Related Article: Here Is What Happens If You Don’t Pay Your Credit Card Bill
Demonstrate Your Cash Flow
Unemployment due to the coronavirus is sky-high. Because of the soaring jobless rates, many lenders are hesitant to approve new credit card applications. Being able to show cash flow is critical to being successful with a card application for anything other than a secured card.
According to many industry experts, banks are more wary of lending – a trend seen by credit card issuers lowering credit limits. Keep your financial records up to date to improve your chances of landing that next credit card.
Related Article: Tips to Manage Your Finances After Losing Your Job
Summing It Up
Credit card issuers are lowering credit limits without warning. These banks and lenders are also more cautious about accepting new accounts due to high unemployment numbers and the economic impact of the coronavirus pandemic.
Despite these realities, however, there are steps you can take to increase your credit card approval odds. Always pay your bills in full every month and monitor your credit reports for any suspicious information. Also, ensure you keep practicing the right financial habits to boost – or maintain – your good credit score.
If you still have concerns about your credit health, consider a secured credit card. These cards offer an easy and straightforward approval process and are perfect for rebuilding credit or extending your existing overall credit limits.
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