5 Things you should know before applying for your credit card online

Don’t go in blind when applying for your credit card. A handful of key considerations can help you better your chances at a successful application.

An insider at a credit card eligibility vetting team once explained that the biggest reason for rejection of credit card applications is a lack of preparedness and a lack of awareness of what exactly needs to be in place when applying for credit cards.

This does not only include the documents required for credit cards, but also one’s general financial profile. To help you approach your credit card application with greater preparedness, we have lined up 5 key considerations to keep in mind, before you apply for your credit card.

• Credit score

Your credit score is a number between 300 and 850 that offers a snapshot to the bank or the lending company, on your ability and track record with regards to paying your debts on time. If you have been a frequent defaulter, you might run into problems when it comes to your credit score. Also known as your CIBIL score, this can be obtained easily for a fee independently.

Alternatively, the bank or non-banking finance corporation (NBFC) that you are considering going with for your credit card, can find this out for you. Institutions checking your credit score (hard inquiries) might cost you a few points off your credit score. You must therefore be sure to do so only with good reason.

• Developing a credit history

If you have never had a credit card before, and have also never needed to opt for a loan, you might have no credit history to show. This sounds like a good thing on the face of it, but sadly, a clean slate does not answer the key question in the lender’s mind: will this applicant settle his or her debts to us on time? As a result, banks and NBFCs might be wary of approving credit cards to those who possess no credit history. This can be remedied through a few simple steps.

• Getting what is known as a collateral credit card, where you put some money on to a card and swipe it to make purchases
• The bank or NBFC might check other features of your finances; maybe you have a good income that will allow you to pay your dues on time, for example
• Debt to income ratio

Potential members need to be punching home at least Rs. 25,000 per month by way of salary or earnings when they apply for credit cards. Burning through the entire amount by the end of the month also does not bode well when applying for credit cards, because it gives the individual what is known as a poor debt to income ratio. What is a good DTI, one might ask? The answer might vary between different banks and lenders, but about 36% to 40% of debt is usually seen as a favorable sign.

• How credit limit affects your future credit history

Before you apply for your credit card, be sure to check the features and benefits that you are going to get on your card. You should always know what you are signing up for. Spend some time to look over a few options.  Check the credit limit being extended on a certain card without fail. It is better to opt for a higher credit limit and not use all of it, because then your credit utilization stats look better. This in turn affects your future credit score. It is said that credit utilization could affect your credit score to the extent of 30%!

• Document requirements

Whatever you claim during your pre-approval process will be vetted with a magnifying class when the actual approval of your application is taking place. Ensure that you have in place all the documents required for the credit card application. Over and above, before you apply for credit cards, you should also keep handy proof of any financial claims you are making. The documents required for credit card application in most cases will include:

Income proof: Form 16, salary slips, or income tax returns

Address proof: Passport, utility bills

Age proof: Passport, voter ID

Identity proof: Passport, voter ID, and some might accept an Aadhaar card as well

Once you have taken care of these 5 things, you are ready to go ahead and apply for your credit card.