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Applying for a Credit Card: What Matters Most?

batch of credit cards

When applying for a credit card, which variables factor most during the approval process?

Each credit card issuer uses their own formula for evaluating applicants, but the general requirements are similar-—in fact, some of the requirements, including minimum age, are mandated by laws such as the Credit Card Act of 2009

Thanks to the Card Act, lenders are only required to extend credit when they believe the applicant has the ability to repay it. This determination is based on two variables: income and  credit data. To determine which of the two is more important, let’s look at what each of them actually is and why they are so important in a credit card application review. 

Credit Score. A FICO score, also called a “credit score” is the number that is used to predict how likely you are to make your payments on time. This score is also used to determine the interest rate you will receive as well as your credit limit. Having a good credit score—something in the range of 661 to 780—makes approval more likely and will also help you receive the best terms and conditions, such as a low variable interest rate and a higher credit limit.

Income. Your income also comes into play—especially your debt-to-income ratio—during the approval process as well as when the credit card issuer is determining terms and conditions. Your salary shows how much you make; your debts show how much you owe. Therefore, these two factors in relation to one another give the credit card issuer a good idea of what your capacity is to make your payments on time. An applicant with a lower income threshold and a lot of debt will most likely receive a much smaller credit limit than someone with a higher income and less debt.

The $64,000 question at this point is which of the two—credit score or income—is more important when a credit card issuer is evaluating your application? 

Although income is still an important factor in the approval process, decision-makers at the credit card company most frequently weigh credit data as reflected in the FICO score over income. 

Having a credit card can be a great convenience when you’re ready for the responsibility of one and your FICO score and debt-to-income ratio supports one.