What really happens when you apply for a credit card

The credit card approval process is truly one of life’s great mysteries. And I say that as a journalist who’s been covering the industry for five years.

I was recently able to pull back the curtain on this secretive process at CardCon, the credit card industry’s big annual convention that took place in September.

There was a panel dedicated entirely to credit card approvals. Let me share this insider information with you, and provide a few tips on how to improve your approval chances.

Where and how you apply matters

There are multiple channels you can go through to apply for a credit card. You can apply at a card issuer’s website or a bank’s local branch. You can fill out an application at a store checkout or click on an affiliate link on your phone. And which channel you choose matters to the card issuer.

“It matters tremendously,” said Nate Whitney, senior director of credit risk strategy at Predictive Analytics Group, at the panel. Issuers associate certain channels with higher lending risk, based on who those channels are available to.

When someone gets a credit card without any intention to pay their card bills, they end up costing the issuer money. And this type of cardholder is associated with certain channels more than others, Whitney explained. To minimize this risk, the issuer considers it in its underwriting (the process of evaluating the lending risk).

Preapproval is a good signal of your approval odds

If you’re getting emails or even snail mail informing you that you’re preapproved or prequalified for a credit card, it is pure marketing. But it’s also a signal that the issuer believes you’re a qualified candidate for the card with a high chance of approval. In fact, the language of such communication can indicate that the issuer must approve your application unless your credit history significantly changes.

Such language includes terms like “preapproved,” “prequalified,” “preselected” and others, as opposed to regular promotions simply informing you of the card.

“There are certain approval rates required by regulators that they must hit based on that language,” Whitney explained.

A lot goes into ensuring you’re the right candidate for the card. It’s not just your credit score the issuer will be looking at. For example, you also have a behavior score, according to Whitney, which assesses your potential profitability for the issuer based on how you interact with credit. Scores like this can’t be used to reject your application — rather, they help the issuer determine whether it’s worth it to market a card to you. 

Credit card issuers have “hidden” rules

Besides having their own scoring models to assess you, card issuers might implement their own application rules they don’t publish anywhere. That means everything might be fine with your credit. You might be a dream cardholder for any bank to have. Yet, after sending in your application, you might still get the dreaded “denied” message — because of such rules.

The Chase 5/24 rule is a common example. This unofficial (and unconfirmed) rule means if you’ve opened five credit cards (from any issuer) in the past 24 months, you are unlikely to be approved for a new Chase credit card. 

There’s a certain level of mystery to these rules and how strictly they’re enforced. Issuers rarely provide any information publicly, so you’ll have to do your own research in third-party sources. 

Then again, don’t take everything you see as gospel. For instance, I’ve heard about Capital One application restrictions multiple times. Allegedly, you can only have two personal credit cards with the issuer at a time. I have three.

The process is automated

For better or worse, it’s likely no one is looking at your credit card application, unless you count AI. Issuers try to get as many applicants through the automated process as possible, according to Whitney. This way, the process is simple and efficient for everyone involved.

However, when you’re neither approved nor denied right away, your application will be pending. That means an actual human being will review it. If you find yourself in this situation, don’t panic. This is your chance to get in touch with the issuer and potentially improve your odds.

“In that case, you actually get to talk to a person,” said Katie Genter, senior writer at The Points Guy. Like Bankrate, The Points Guy is owned by Red Ventures. “They can then ask you additional questions, get additional information and then make a decision based on that.”

A minimum credit score is a mystery

When you apply for a credit card, you need to meet credit score requirements. There is indeed a minimum credit score you must have. The problem is, you won’t know what it is. It’s rare that credit card companies share this information. Most of the time, the best you’ll get is a credit score range.

Of course, even a range is helpful when you’re trying to gauge your chances. It’s easy to check your credit score these days. But you can’t fully rely on that single number. You have more than one credit score because there are numerous credit scoring models and three credit bureaus issuers can pull data from to generate a score. Moreover, the industry standard is to use at least two scores to access a credit application, Whitney said.

If your credit score that you have access to is in the 700s or 800s, that’s probably not a big deal. You’re likely to have a good shot at being approved for most card products in the market. It can be a little trickier if your score lives very close to in between the ranges. For example, if you see that your FICO 8 score at Experian is 671, it’s considered good. But it might be a little lower with a different model or credit bureau. Just two points less, and you’re in the “fair” territory.

It’s even trickier if you don’t have a credit score yet. This might be the case if you’re new to credit or haven’t used it in many years. Popular scoring models might not be able to generate a score for you due to the lack of data. New models emerge to provide a score based on alternative data such as rent payment history, utility bill payments and more. The new FICO Score XD, for example, even considers your address history — apparently, if you move a lot, you might be a risky borrower. (I’m so happy that I’m perfectly scorable or I’d be in trouble.)

This comes with certain issues too. Not all lenders use these models: switching to or adding a new score is no easy feat. Further, you probably won’t be able to check such a score as easily, either.

The bottom line

Credit card issuers are pretty tight-lipped when it comes to their application processes. Learn what you can before you apply — that’s the best you can do. Check your free credit scores and do your research on the card. If it seems like you have a chance, apply. The worst the issuer can do is say no. 

And it’s not the end of the world if it does. Your unsuccessful attempt might cost you a few credit points and will stay on your credit reports for a couple of years, only impacting your credit for one year. Give at least six months before you try applying for a card, even a different one. You don’t want the issuer to think you’re desperate for that credit line. Meanwhile, I’ll be hoping for a more transparent process so that one day, I can give you more actionable advice.