What Elements Does a Credit Card Issuer Look at When Extending Credit?

Credit card issuers check your credit and income before approving your application.
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Every credit card company establishes its own underwriting procedures, but most lenders base lending decisions on the four C's of credit: capacity, conditions, credit and collateral. You don't need to worry about collateral if you're applying for an unsecured credit card, but if you're deficient in any of the other three areas you may have your application for credit denied.


Card issuers check your credit report whenever you submit an application. Your report contains details of the loans and credit accounts that you've had in the last seven years. The report also contains a score ranging from 300 to 850. If you pay your bills on time and manage your debts then you'll have a high score. Frequent late payments and past-due bills will cause your score to fall. If you have a high credit score you're more likely to be offered a card with a high credit limit and a low interest rate. If you've got a low score you may not qualify for a card at all.


Legally, a credit card issuer must attempt to find out whether you actually have the capacity to manage a credit card account. This means asking you about your income on the application. A card issuer may contact your employer to verify your employment, and some firms even request evidence of income, such as pay stubs. Even if you have a high credit score, it doesn't make good business sense for a lender to lend you money that you can't afford to repay.


Among the four C's of credit, the conditions are the element that you have the least control over. Basically, the lender has to decide if makes sense to give you a credit card based upon factors ranging from the condition of the economy as a whole to the state of the lender's current loan portfolio. A lender may feel conditions are not right simply because the company already has more credit card customers than it can handle. Some lenders may also want to know how you plan to use the card. Many lenders use incentives such as travel rewards or gas points to drive your spending in a certain direction. As with credit and capacity, you can't get the card if the lender feels that the conditions aren't right.

Other Considerations

Under the Fair Credit Reporting Act, credit card firms and other lenders aren't allowed to discriminate against prospective customers based upon factors such as age. If you are legally an adult you can apply for a card. As of 2010, lenders can't issue cards to people under the age of 21 who don't have a source of income unless these individuals apply with a cosigner. This rule is designed to prevent lenders from marketing cards to students who can't afford to repay the debt. If you apply for a card with a cosigner, the lender will largely base the decision on the cosigner's credit and capacity, and of course the conditions.

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