In this article we run through all you need to know about applying for a credit card to help improve your chances of getting accepted.
What is a credit card and how does it work?
Credit cards allow you to borrow in order to buy items upfront and you then pay back the amount borrowed either in full or in monthly instalments. How much you can borrow on your credit card will depend on the credit limit you are given by your credit card provider, but it is typically a few hundred or a few thousand pounds.
Your credit card provider will send you a bill each month that will outline the amount you owe and the minimum sum you need to pay that month. Should you choose to, you can pay more than this each month, or even the full balance. If you don’t pay off the full balance, interest will usually be added to the amount owed - unless you have a credit card that offers an interest-free period for a number of months.
When applying for a credit card, lenders will look at your credit report to see whether you have borrowed responsibly in the past. This will help them to decide whether or not they are happy to lend to you - the higher your credit score, the more likely you are to be accepted for a credit card. Your credit score can also determine the interest rate you will be charged on your credit card.
You can find out more about how credit cards work in our article: 'How do credit cards work and which one is best for me?'
Am I eligible for a credit card?
Whether or not you are eligible for a credit card will partly depend on your credit score. If you have never borrowed before, you are unlikely to have much of a credit history and your credit score is likely to be low as a result.
This doesn’t mean you won’t be accepted for a credit card, but it does mean lenders may be more reluctant to let you borrow. It also means you’re less likely to be accepted for the most competitive credit cards.
On the other hand, if you’ve built up a credit history and your credit score is high, you’re much more likely to get accepted and qualify for credit cards that offer competitive perks such as cashback or low interest rates.
Many credit card providers now offer eligibility checkers that run a ‘soft’ search on your credit file and estimate how likely you are to be accepted for a particular credit card. Soft searches do not leave a mark on your credit report as a ‘hard’ search would, so you don’t need to worry about it affecting your chances of being accepted for credit.
Using an eligibility checker can help ensure you only apply for credit cards you are likely to be accepted for. This can prevent you from making too many applications in a short space of time which can make you look desperate for credit.
Credit card types
There are several different types of credit card and it’s important to pick one that’s right for you. If you’re wondering which credit card you should get, here’s a rundown of the options:
Credit building credit cards
If you have a low credit score or you are applying for your first ever credit card, a credit building credit card can be a good place to start. Credit building credit cards are aimed at those with poor credit scores and are designed to help you improve your credit score over time. You will usually be given a low credit limit to start with, but if you use your card sensibly, this can increase after several months.
The biggest drawback to credit building credit cards is that they charge high rates of interest. To avoid this, it’s best to pay off your balance in full each month if you can. Note that a few credit building cards offer interest-free periods for up to three months, but it’s vital not to let this encourage you to spend more than you can afford to pay back. To read more about credit building cards, take a look at ‘Compare the best credit cards if you have bad credit’.
0% purchase credit cards
A 0% purchase credit card will allow you to spread the cost of your spending interest-free over several months. This can be particularly useful if you have a large purchase in mind, such as home improvements, as you can pay off the amount you owe in monthly instalments without worrying about interest stacking up.
Keep in mind, however, that if you don’t clear your balance before the 0% deal ends, you will start paying interest, so it’s worth calculating how much you’d need to pay each month to ensure this doesn’t happen. For example, if you spent £3,000 on a credit card offering 0% for 15 months, you’d need to pay back £200 a month to ensure you’d paid off your balance before those 15 months were up. Note too that the most competitive 0% credit cards are only offered to those with good credit scores. Read more in ‘Compare the best 0% purchase credit cards’.
0% money transfer credit cards
A 0% money transfer credit card enables you to move funds from your credit card into your bank account. You can then use this money to pay off an expensive overdraft, for example, or to make purchases. You will usually need to pay a transfer fee of around 4% of the balance, and remember, once the 0% deal ends, interest will be charged. Find out more in ‘A complete guide to money transfer credit cards’.
Cashback and reward credit cards
Another option is a cashback or reward credit card. Depending on the type of card you choose, you might be able to earn airmiles as you spend, earn loyalty points in your favourite retailer or supermarket, or get cashback.
Cashback and reward credit cards can, however, charge high rates of interest, so if you are unable to pay off your balance in full, the amount of interest you will pay could far outweigh the benefits of using the card. Read more in our article ‘Compare the best cashback and reward credit cards’.
Travel credit cards
Alternatively, if you regularly travel overseas you could consider a travel credit card. This type of credit card won’t charge you for foreign transactions when you spend abroad and many also allow you to avoid cash withdrawal fees - although you will usually still be charged interest. You can find out more in our article ‘Compare the best travel credit cards’.
Things to consider before applying for a credit card
Before applying for a credit card, it’s worth being aware of the following points:
The APR is the annual percentage rate and it takes both the rate of interest you’ll pay and additional charges into account. The APR is used to compare credit cards and loans so you should always check what it is before applying for a card. Note however that the APR you see advertised won’t necessarily be the one you get as the advertised APR only has to be offered to 51% of successful applicants. The remaining 49% may be offered a higher rate.
Charges and fees
When comparing credit cards it’s also important to check the small print for any charges or fees. If you are carrying out a money transfer, you’ll usually pay a transfer fee of around 4%, but there are also fees for missed payments, exceeding your credit limit, or withdrawing cash on your credit card. Some credit cards also charge monthly or annual fees, particularly if they offer competitive benefits. Always ensure you know what these are to avoid any nasty surprises.
Your credit card bill will state the minimum amount that must be repaid each month, but be aware that minimum monthly repayments are typically only around 1% to 2.5% of the balance. Only paying this amount each month means it will take you far longer to clear your debt and you’ll pay a lot in interest. If you can, it’s best to pay off more than the minimum each month or ideally, the full balance. To help you remember to pay on time, set up a monthly direct debit.
Your credit score
As mentioned earlier, your credit score will play a role in determining whether you will be accepted for a credit card and the rate of interest you’ll be charged. The better your credit score, the more likely you are to be accepted.
If you have never checked your credit score, it’s a good idea to do so before you apply for a credit card. You can do this free of charge via services such as Experian, Clearscore and Credit Karma. This can help you to understand how likely you are to be accepted for a credit card and you will also be given tips on what you can do to improve your score.
It’s well worth checking your credit score at least once a year and making sure you correct any errors on your report. Simple steps such as paying bills on time and registering on the electoral roll can also help your credit score. For more information, read our article ‘How to improve your credit score quickly’ and watch our video ‘What is a credit score and how do you check it?’.
How to apply for a credit card
Once you’re ready to apply for a credit card, you can do so in a number of ways:
Online - this is often the quickest and easiest way to apply. You simply fill in a form on the provider’s website and you may then be sent some paperwork to sign and send back.
By post - you can usually request an application form online, over the phone or in branch and send the form back by post.
Over the phone - you can also phone the provider who will talk you through the application form and fill it in for you. You may then be sent the pre-filled form to sign and return by post.
In branch - if your chosen provider has a local bank branch, you can also apply there.
What information do I need to provide?
When you apply for a credit card, you will usually need to provide the following information:
- Your name and address
- Your date of birth (you will usually need to be aged 18 or over)
- Your nationality
- Your employment status
- Your salary or income
Your identification will be checked through your credit record and the electoral roll but you may also be asked to send in copies of documents such as your driving licence, passport or a bank statement.
How long does it take to be accepted?
It takes just a matter of minutes to fill in your credit card application form. If you’ve applied online, many providers offer instant approval, otherwise, you may have to wait 5 to 10 days before finding out whether you’ve been accepted.
Once accepted, your credit card should arrive within 10 working days. You’ll then need to activate it - usually by phoning an automated number - and once your PIN has arrived, you can go ahead and use your new card.
What should I do if my credit card application is declined?
If your application is turned down, avoid applying for another credit card straight away. Every time you apply for a credit card, a ‘footprint’ is left on your credit report. If you apply for several credit cards in short succession, a lender will be able to see this on your credit report and may believe you are desperate for credit.
Instead, it’s best to wait three to six months before applying again. During that time it’s worth checking your credit score and looking at ways to improve it by following the tips mentioned above.
When you decide to apply again, consider applying for a credit card you’re more likely to get accepted for, such as a credit builder credit card. These allow you to build up your credit score which can help you to get accepted for more competitive credit cards later on.
What are the alternatives to a credit card?
If you’re not sure whether a credit card is right for you, there are a number of other options to think about.
Prepaid cards allow you to pre-load your card with cash and then use your card in the same way as a debit card. The advantage of a prepaid card is that you can only spend what’s on it, making it a good option if you’re on a budget. Prepaid cards can also be a good choice if you have a poor credit score as you won’t usually need a credit check.
The disadvantage is that you may be charged fees for applying for the card, adding funds to your card, withdrawing cash, closing your account or even not using your card for a number of months.
A debit card is tied to your current account, allowing you to spend the money that’s held in your account. There is no credit facility on the card, but if you have an overdraft with your current account, you may be charged fees or interest for using it.
A store card is a type of credit card that can only be used in a particular retailer or group of retailers. You’ll often be asked if you’d like to apply for one when you make a purchase in a shop. Store cards can be attractive as you’ll usually be offered discounts and other membership perks when you sign up.
However, store cards should always be used with care as they typically charge high rates of interest which can make spending on them very expensive. Plus, if you miss a payment you will usually be charged a fee and this will affect your credit rating.
Buy now, pay later
There are several buy now pay later schemes that pop up when you shop online, including Klarna and Laybuy. These services allow you to buy items upfront and then split the payments into equal instalments interest-free.
But while spreading your payments might appeal, these services should be used with caution and you should only ever spend what you can afford to pay back to prevent you from getting into unnecessary debt.
A far simpler option is to put money aside into a savings account each month and save up for whatever it is you need to buy. It also pays to have a savings fund to fall back on in the event of an emergency. This can help you to pay unexpected bills or even support you if you lose your job.