You've probably heard by now that a credit card can help your credit, so long as you do all the right things with it. What you may not realize is that the process of doing the right things starts before you ever get your plastic.
Each credit card application typically generates a hard inquiry on your credit report — which can hurt your scores, particularly when they're en masse. So you'll want to avoid simply applying for a new card (or cards) willy-nilly.
Here are some steps to take to ensure you have a good game plan when applying for a credit card.
1. Consider Your Spending Habits
And what you need the card for, because both factor into which credit card is right for you. There are lots of different categories of credit cards out there, each one suited to a different need. Carry a balance every now and then? You'll probably want to look into low-interest credit cards. Need to pay down a high-interest credit card balance? Then a balance-transfer credit card might be your best bet.
And if you're not prone to carrying a balance, you may want to reap the rewards. But, even then, you've got some thinking to do, because, depending on your spending habits, one rewards credit card may be more lucrative then another. If you travel for business a lot, a hotel or airline credit card may be the best choice. If you spend a lot on food, you might want to get a cash back card that offers bonus points back at restaurants, grocery stores or wholesale clubs. And so on and so forth. In any event, you'll want to narrow down your choices.
2. Determine Whether You Can Qualify
Because this, too, will effectively influence what card you ultimately apply for. Credit card approvals are generally governed by two major factors: your income and your credit score. And, while it can hard to pin down an issuer's specific underwriting requirements, you can get a general sense for what it takes to get approved for a particular card by doing a little a research online. When it doubt, remember that cards with the best terms and conditions typically require a good credit score. So, if a card's got a really low interest rate or super-premium rewards program, you can safely assume that, at the very least, your credit will need to be in tip-top shape.
That's why it's a good idea to check your credit before you fill out any applications. You'll want to know where you stand so you don't wind up incurring a hard inquiry for naught. (You can view two of your credit scores for free each month on Credit.com.) You'll also want to spot and dispute any errors on your credit reports before you apply, so you don't get rejected through no fault of your own.