On the other hand, using a credit card responsibly will affect your credit score positively, and is one of the best ways to build a strong rating.
Also, in some cases receiving a new credit card boosts your credit score because it increases your combined credit limits and improves your utilization ratio. The utilization ratio is the amount of credit that you are using compared to what is available to you. But both are factors in determining your credit score. While this is a nice bonus, it’s not recommended as a strategy, particularly if you expect to apply for another loan or mortgage in the near future.
How to apply for the right credit card
Step 1: Assess your financial standing
Before you get to your applications, you’ll need to have a good grip on where you stand financially.
Check your credit score
Checking your credit score is dead simple, and it can help guide you to which cards are right for you. Contrary to popular belief, you can check without it having any effect on your credit rating. There are several online services that let you check your score securely and for free, or you can go directly to Equifax or TransUnion, the two major credit bureaus—for a small fee.
Credit scores are evaluated with a number between 300 and 900. The higher the number, the better your score and the less of a credit risk you are considered. To apply for conventional credit cards, you’ll usually need a rating of at least 650. Those with higher scores have a broader selection of cards to consider and a better chance of being approved. (Need more help? Here’s how to improve your credit score.)
Income and history of bankruptcy
Annual income is one of the factors that can affect which cards are available to you. Some have low or no income requirements, while others restrict applicants by income. This information is typically right on the application, so make sure you check that first. To be considered for most credit cards, you must have no history of bankruptcy within the past seven years.
