Applying for a credit card: a guide
Applying for a credit card: a guide
Being sure you can meet the repayments on a credit card is the first step to getting a card that works for you. Here’s everything you need to know before making an application.
What are the steps to applying for a credit card?
Before applying for a credit card, you should ask yourself:
- What is my credit score, how can I check it and how might it impact me getting a credit card?
- How do I choose a credit card?
- What is APR and what rate could I get?
- What should I do if my credit card application is declined?
- What’s the golden rule of credit card spending?
- Where can I compare credit cards?
Follow these simple steps to get the process started.
1. Check your credit score
If you’ve ever bought something on credit or taken out a loan, then you’ll have a credit history. This information – in the form of a credit score – will be used by lenders to help them figure out if you should qualify for a particular credit card, loan or mortgage.
There are three main credit reference agencies that offer free credit score checks. They are Experian, TransUnion (formerly Callcredit) and Equifax. Increasingly there are credit checking apps, such as ClearScore, which offer a similar service.
2. Consider what type of credit card you want
The type of card you choose will depend on what you want to use it for.
Spreading the cost of a large item or items
A card that offers 0% on purchases could be suitable, provided you can pay the balance within the 0% period. Goods and services costing over £100 and up to £30,000 are covered by Section 75 of the Consumer Credit Act, so credit cards can provide an extra layer of security if you’re making a sizeable purchase.
If you want to clear or consolidate debts on other cards, or reduce the interest you’re paying, explore cards that offer 0% on balance transfers. There may be a fee to pay for transferring your balance, as well as a monthly or annual fee, so you’ll need to factor these into any savings you might hope to make.
Building your credit record
Credit building cards can be used to repair your credit score if you have bad credit, or to start building a credit history.
Getting rewarded for using your card
Rewards cards can give you cashback, air miles, or points or vouchers to spend in stores. Ideally, you’ll need to pay back what you owe in full every month, otherwise interest charges might outweigh your rewards.
You can compare cards by type, brand and other features using Compare the Market.
3. Look at the APR
Once you’ve narrowed down your search, look at the APR offered by the cards you’re interested in. APR, or annual percentage rate, is a calculation of how much interest you could be charged for borrowing over a 12-month period if you don’t pay the amount back.
Broadly, the APR is a useful way to gauge how competitive a credit card is. It will take into account interest and any other standard fees and charges. The rate you could get will vary from provider to provider.
It’s important that you understand the difference between personal and representative APR.
Personal APR is what you’ll pay in interest on your borrowing. However, when you see the term ‘representative APR’, it means that 51% of successful applicants would get the advertised rate. So, if a credit card is described as having 22% representative APR, then 51% of people accepted have to get 22% APR, but the other 49% could be offered a different rate (and this will often be higher). It’s also worth looking at any non-standard fees or charges not included in the APR.
Find out more in our guide to APR.
4. Check your credit card eligibility
Lenders will look at your credit score against their own criteria to see if you’re eligible for their card and to decide what rate to offer you. Applying for cards has an impact on your credit file, so it makes sense to see if you’re likely to be eligible for a card before you apply. Use our online eligibility checker to get an idea of whether you’re likely to be accepted for the cards you have in mind.
5. Fill in the application form
Lenders will want your current UK address, your email address, your phone number, your gross annual income, and the sort code and account number of your primary bank account.
Applying online with usually mean less paperwork, as the lender will verify your ID and address electronically via a credit reference agency. To complete this process, you may need to answer a few important questions only you would know the answer to.
In some cases, the lender may ask for more proof of ID. This usually only happens if they don’t have access to enough information about you on file. In this case, you may have to head to your nearest branch with your ID or post a certified copy to the lender. Sometimes, the lender will simply ask that you send a recent photo of yourself along with a clear photo of your passport’s identification page.
If you complete your application at a branch, you’ll need to take proof of ID along with you (driver’s licence, passport, etc) and proof of address (driver’s licence, a recent utility bill, etc). Be sure you know which documents will be accepted before you make your way there.
If your application is accepted, you can expect to receive your credit card within 10 working days of being notified.
How do credit card companies make a decision?
First and foremost, you’ll need to meet the credit card provider’s minimum eligibility requirements for your application to be approved. The provider will also base their decision on your credit score, your income and your ability to afford repayments.
What should I do if my credit card application is declined?
If your application gets declined, don’t despair – and definitely don’t go and apply for lots more cards. Having multiple credit card applications, especially in a short period, could dent your credit score because providers might view it as high-risk behaviour. So, it's best to work out why you might have been declined before applying for another credit card.
If you have been turned down by a provider, they should be able to give you the main reason for doing so if you ask them. Therefore, you should first contact the lender to ask them for clarification.
What else should I consider when applying for a credit card?
When applying for a credit card, think about:
- Whether you can manage your card responsibly: credit cards can be handy, but you’ll need to resist the temptation to spend more than you can afford.
- Fees and charges: think balance transfer fees, annual fees, late payment fees, foreign transaction fees and more. Make sure you know what the costs of your card are so you can keep them to a minimum.
- Credit limits: credit cards don’t equal unlimited spending. Your credit provider will set an upper limit based on your income and credit score.
- Minimum repayments: be sure to make at least the minimum repayments on your card to avoid negatively affecting your credit score and being hit with penalty fees.
- interest-free periods: most credit card providers will grant you a ‘grace period’ where there won’t be any interest on your card spend – this is typically between 45 and 59 days. Make sure you know precisely what this interest-free period is, though, as not all providers will offer the same time frame.
What’s the golden rule of credit card spending?
When it comes to using your credit card, it’s always a good idea to pay off your card in full and on time every month – or, at the very least, meet the minimum payment. By doing so, you can stay on top of your borrowing while building up your credit rating. Bear in mind, though, that if you only make the minimum repayment it will take longer to pay off your debt and you may end up paying more in interest.
If you don’t make at least the minimum payment, your credit rating is likely to take a knock, which could impact your ability to get credit in the future. Plus, late and missed payments can lead to spiralling fees.