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Getting the Credit (Card) You Deserve

Anyone with an active mailing address - and that even includes our furry friends - knows that there are many credit cards out there looking for our business. Here at FiLife, we’re interested in reviewing and discussing these options.

One question that seems to keep popping up on our discussion pages is “how do I get the credit card that suits me best”? The FiLife team asked me (the Credit Card Guru) to say a few more words about this topic on the blog. I’m hoping we all can exchange thoughts in the comment section below.

Credit card applicants should keep these three factors in mind when hunting for a new card:

1.) Acceptance: Will my application be approved or denied? Your credit profile usually determines whether you’ll be accepted or not. And cards with the most desirable terms—rewards, low interest rates, et cetera—inevitably are reserved for those with strong profiles. But how do you know whether your profile is strong enough?

Alas, this isn’t as simple as looking at your standard FICO score. For starters, most card issuers use an alternative scoring system called the Bankcard Industry Option FICO score. It’s difficult for most consumers to get their hands on this score.* The good news is that while the Bankcard FICO won’t mirror other credit scores, the same good behavior that boosts regular credit scores will keep this one healthy as well. So don’t pay late, apply for new credit in moderation, and keep your card balances well below their limits (that is, keep your “credit utilization” low). Bottom line: if your credit profile isn’t already strong enough to qualify you for the card you crave, these “good borrower” behaviors will help you get it eventually.

2.) Credit line size: What limit will the card issuer approve me for? The limit is typically a function of income: the greater your declared income, the greater your line of credit. Interestingly, credit card companies usually ask about household income, not about the applicant’s income. So, if you’re a college student living with Mom and Dad, the truthful answer to this question would include both your income and your folks’ income combined. While you shouldn’t even think about making untruthful statements on an application for credit, there is nothing wrong with providing truthful answers which happen to work to your advantage.

The size of your credit line is important for a few reasons. First and most obviously, the larger your limit, the greater your buying power. (For many, that may also mean the greater the temptation to spend beyond your means! If you fall into this camp, please remember that curbing this spending is FAR more important to your financial well-being than finding the optimal credit card.)

Another reason is that larger limits make your “credit utilization” lower in turn helping your credit score. For example: If you have $750 in purchases show up on your credit card statement, that might hurt your credit profile significantly if your limit is $1,000. On the other hand, if your limit is $10,000, those purchases won’t have a significant negative effect.

3.) Credit terms: Interest rates, the length of promotional offers, annual fees, etc seem to vary. How can I get the best ones? On some cards all approved applicants will receive identical terms. But sometimes terms vary by applicant. When they vary, they usually do so based on your credit profile, and sometimes on your desirability as a customer aside from that profile. For example, one of the best all-around rewards cards, the Blue Cash Credit Card from American Express, contains this language in its application:

0.00% Introductory APR (0.0000% DPR) for Purchases for up to 12 months of Cardmembership. Then, a variable APR of 8.99% (0.0246% DPR);11.99% (0.0328% DPR); or 14.99% (0.0411% DPR), depending on our review of your application and credit history.

That “depending on our review of your application and credit” line is the key here. And the review doesn’t just affect these terms: it will also affect whether or not a new applicant can take advantage of their very good 3.99% for life balance transfer offer.

The takeaways from all this are pretty simple. Most of the best cards require you to have a strong yet attainable credit profile—measured by the Bankcard FICO or similar yardsticks—to get your foot in the door. After that, better profiles will help you get the best terms a card has to offer. As for the size of your credit line, the key is to be able to truthfully represent a substantial income—generally a household income.

– Dave Hanson, FiLife’s Credit Card Guru

* If you have a Washington Mutual or Providian credit card you can get your Bankcard FICO score for free via your credit card’s website. (It will be 30 days out of date though.)

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