While you may know how to use a credit card, knowing how the approval process works is important too. This will allow you to apply in a way that you get your card by when you need it, and ensure that you do all that is within your control to expedite the process. Since a credit card offers immense financial flexibility and heightens your purchasing power, it pays to understand the approval process.
In a nutshell, the following 4 steps encapsulate the credit card approval process most financial institutions abide by.
Step 1: Applying for your credit card
In a day and age where financial institutions are technologically evolved, applying for a credit card is incredibly easy. More often than not, you can fill out a form online or walk into a branch to file an application and submit the necessary documents.
Step 2: Processing your application and verifying documents
Once you hand over the application form and required paperwork, the issuer will evaluate it against parameters that the financial institution follows. This means checking the information you have entered, verifying the documents that you have submitted, etc. Two key factors it looks into are your income and profession. Your income must be above a certain amount to qualify and this base line may vary for different cities. Moreover, what you do for a living has a bearing and salaried applicants typically get approval more quickly, as it is believed that they receive income more steadily as compared to self-employed applicants.
Step 3: Checking your credit score
Another crucial factor is your credit score. It is a summary of how you have used credit in the past and basis what it reveals, the issuer may approve or reject your claim. A high credit score is indicative of the fact that you are responsible and use credit as it is meant to be used. A low credit score can be owing to various reasons, but it implies that your credit management abilities are sub-par. As a result, your application may be rejected.
Apart from your score, the issuer is likely to check your credit report to see if you have made multiple hard inquiries for credit in quick succession, within a short span of time. If you have, it is possible that your application may be rejected as you may be deemed to be credit hungry.
Step 4: Making a final decision
Once issuers look into all these aspects, they may seek additional documentation from you if they feel the need to. Alternatively, you may find that it is taking your issuer longer than anticipated to inform you about your credit card status as they are verifying your income details with your employer. Once this is complete, your application will be approved.
So, the next time you’re wondering why it’s taking a financial institute a long while to get back to you about your credit card status, remember the steps that are involved in the process. Also, do your best to turn the odds in your favour such as applying with a financial institute where you’re an existing customer, as the background check will be quicker.