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It’s a good idea to review your credit before applying for a credit card, in order to identify areas for improvement. The reason is that a better credit score can help you get lower interest rates, higher credit limits, and better credit cards.
Whether you’re applying for your first credit card or your fifth, you should take some time to improve your credit score. You can prepare your credit for a credit card application by doing the following six things.
1. Know Where Your Credit Stands
You should know your credit score before applying for a credit card. With excellent credit, you will be able to shop around for a premium credit card. In the case of bad credit, you may want to consider secured credit cards.
It is possible for your credit score to change depending on the scoring model used, and different lenders may use different tools. But a credit score simulator can give you an idea of where you stand and the types of credit cards you can obtain. Additionally, you should pull your credit reports to identify any potential problems. Getting a three bureau credit report from IdentityIQ is a great start.
2. Review Your Credit Reports
When you pull your credit reports, you should look for negative items that hurt your credit score, such as late payments, unpaid debts, and bankruptcies. In most cases, you can’t do anything about legitimate information (other than wait for it to disappear from your report), but you can do something about negative items that are caused by fraud or error.
3. Dispute False Information
You may be a victim of clerical error or identity theft if there are negative items on your credit report that you don’t recognize – such as accounts you didn’t open or debts you don’t have. It is important to dispute false items with the credit bureaus and have them removed from your report. You should also alert the credit bureaus and the police if you think you’ve been a victim of identity theft.
In order to dispute items on your credit report, you may want to delay your credit card application until you can get the false information removed.
4. Pay Down Other Credit Card Debts
Credit utilization, or how much debt you have tied up with your available credit, is one of the factors that affect your credit score. If you carry too much debt on your credit cards, your credit utilization rate rises and your credit score suffers. Pay down your other credit card debts; it will improve your credit score and make it easier for you to manage a new card.
5. Make Your Payments on Time
Approximately 35% of your credit score is derived from your payment history, according to Experian. Late payments on your credit report can negatively impact your score. If you plan to apply for a credit card, you should be extra careful to make all your payments on time and in full.
6. Choose One Card
Upon submitting an application, the credit card company will conduct a hard inquiry into your credit history. If you make too many hard inquiries at once, your credit score will suffer and you will appear desperate for credit. Do your homework and choose one card that’s right for you when you’re ready to apply. Don’t apply for multiple cards at once.
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