How do Credit Card companies approve Credit Card applications

How do Credit Card companies Approve or Deny Credit Card Applications

The origin of credit card we may credit to 18th century writer Edward Bellamy for his novel Looking backward, in which he referenced payment card as Credit Card eleven times.  There after lending credit to consumers, traders, was done through charge coins in late 18th and early 19th century.



It was not until Bank of America in September 1958 came up with BankAmericad card and this became the first successful and modern banking credit card, which was adopted by consumers and also became a beacon for rest of the banks to follow and come up with there own version of Credit Cards. Later its name was changed to VISA. Looking at Bank of America's success the Mastercard and other banks joined together to form a collision and came up with there Credit Card as MasterCard to compete with VISA.




During initial years getting a Credit card was easy, the process of lending was new and in order to get more customer banks will mail thousands pre-printed credit cards through unsolicited mails to thousands of bank customers without actually evaluating their creditworthiness. This led to chaos as many of them were unemployed, debt ridden and didn't have a stable job. After US President intervened and a process was put in place to send only the unsolicited credit card application.




Source: Wikipedia - Read more about origin of Credit Cards and how it evolved from a coin charged process to a  plastic Credit Card.




Moving on to the Blog title - How do Credit card companies approve Credit Card applications. The process of lending  credit on credit card is same as getting credit from bank for home or auto. In both process a underwriting algorithm process is involved to evaluate consumers financial strength and weakness to measure risk a credit card company or Bank is willing to take.




The important factors such as current credit available and its use dictates how well are you managing your credit.




How frequently you are applying for credit, and at how many places you are getting approved or denied.




What is the length of your financial history in terms of paying bills (Utility, Mortgage, auto etc.) , which gives deep look into your financials balance sheet.




Another important factor is consumers payment record, is it blemish such as missing bill payments, or are there any delinquencies (30, 60, 90 days), which is a red flag to lenders.




Finally a installment loan makes your chances more better as it suggest  lender that you are discipline in making your monthly payments, it shows commitment and sincerity in dealing your promises to lenders.




Source: Credit Karma - Read more on How credit companies approve or disapprove credit card applications - What underwriting process they use to approve or deny credit request. - << Read more >>




More on Online Credit Cards - << Read more >>