So, you've decided that you need a credit card. You've compared deals, and selected the card you think best suits your needs. Now, you must navigate the complexities of the application form to maximise your chances of being accepted.
What are credit card application forms?
Credit card issuers cannot force anyone to take their products, and they are not obliged to offer their products to everyone, so before a customer gets a credit card, they must apply.
When you do apply, the card issuer you have selected must decide whether or not they are willing to offer you credit, and if they are willing, how much credit will they offer?
The ability to lend to some people largely depends on a credit card issuer's ability to decline others, who are likely to default on their debts. Accepting too many individuals with poor credit management skills would quickly cause card issuers to become insolvent. Equally, they are legally obliged to lend responsibly, so they cannot extend additional credit to those who are already over-indebted.
To make these judgements (without any prior knowledge of their applicants) credit card issuers ask a series of questions which inform their decision-making. These questions are contained within the application form, and they must be completed before your application is assessed.
What questions do credit card application forms contain?
Credit card application forms differ from issuer to issuer, depending on the information they need to make a balanced judgement, but most contain very similar questions. Broadly, these questions can be broken down into three areas.
Titles are the identifiers that precede your given name. You will usually be prompted to select one from a list of existing titles, including:
- Mr - generic for all men
- Mrs - traditionally used for married women
- Miss/Ms – traditionally used by unmarried women
Other titles, including Doctor and Reverend, are sometimes also included, but unlike some countries, it is uncommon for other professionals to use their job title as their official title.
When applying for a credit card, you must include all of your given names, including middle names, as this will help your card issuer quickly retrieve your credit file(s).
Most credit card applications still limit applicants to a binary gender choice, so unless you have obtained Gender Recognition Certificate, you must enter the gender you were given at birth.
Date of birth
Your official date of birth as recorded on your birth certificate.
For the vast majority of applicants this will be British, but under certain circumstances, people who are officially resident in the UK can also apply.
Most application forms offer pre-set expressions of marital status, and you must use the one best describes your situation at the point you complete the form. These options typically include:
- Civil partnership
Some forms also offer 'Separated', 'Living Together', or 'Cohabiting' options.
If your application is successful, your credit card issuer will need to contact you so that they can mail you your physical card and pin number. Once activated and used, they will also need to be able to send you your credit card statement, so you cannot apply for a card without a residential address. Aside from day to day account management, they may also want to contact you to offer you special deals and promotions (although you can opt out of this). To do this, they typically request your:
- Phone number(s)
- Email address
- Residential address
Alongside your residential address, many will ask for you to indicate how long you have lived there. If you have lived at your current address for three years or less, they are likely to request your previous address too. This is required to enable them to search your credit file more accurately.
All UK credit card issuers are bound by law to lend responsibly. To do this, they must ensure that they do not over in-debt their customers. Your credit file contains much of the information that they need to do this and to make good approximations for the gaps in data, but it remains an incomplete view. To more accurately determine your financial circumstance, lenders request information regarding your current finances (income and expenditure).
Application forms tend to have predefined options to describe your residential status. These include;
- Private tenant
- Council tenant
- Living with parents
Understanding your residential status enables card issuers to understand whether you have assets (property), from which they could ultimately seek reimbursement (via the courts) if you failed to repay your debt to them. As such, homeowners are traditionally viewed as better prospects for lenders. However, this is not always the case, since mortgage repayments appear in your credit file(s), and if they appear too high, relative to your income, you may find that being a homeowner actually impedes your application.
Having a steady source of available income is essential for being accepted for a credit card. That doesn't mean that you will necessarily be declined if you are not in employment, but being employed goes a long way to demonstrating income.
Of course, lenders will also want to establish that you are not in temporary work (unsteady and likely to be terminated quickly), so they will often also request to know how long you have been with your employer.
They may also ask for your occupation, which on the face of it may seem irrelevant. However, just as your occupation is a consideration for insurance risk, so it is a risk factor for lenders. Certain jobs predispose people to be a better or poorer credit risk. Obviously, that does not mean that everyone in a given profession has the same approach to credit, but, when viewed in the aggregate, common traits do appear that lenders can use to help steer their lending policy.
Personal annual income
Aside from being employed, there are other ways that you can derive an income. By asking for your total income, card issuers can ensure they assess your entire financial position. In this way, some lenders are able to offer credit to those on benefits, pensioners, and self-employed sole traders.
Many homemakers may not have a documented source of income, but they are not necessarily ineligible for credit. Often a partner or spouse's income will be considered by card issuers, as they assess an applicant's creditworthiness.
Household income is also an important consideration when determining whether your outgoings reflect your income. For instance, a mortgage payment could be high relative to your monthly salary, but, if the mortgage payment is shared by two people, it may be sustainable.
Not all application forms include space for your personal expectations, but many lenders now do. This is because they have become wise to the fact that people who are aware that their finances are likely to deteriorate imminently sometimes apply for credit before the change takes effect, to maximise their chances of acceptance.
Having established your incomings, a lender also needs to understand how much you spend in a typical month. To do this, they ask questions regarding your monthly outgoings.
Although mortgage repayments appear, rental payments do not always show in your credit file. Lenders, therefore, ask for this information as standard from all applicants, so they can understand what your largest outgoings are.
They also tend to require information regarding your number of "dependents". This helps with forecasting how far your income must stretch, and whether you have scope to manage additional borrowing.
Having a current account demonstrates stability and is a useful additional demonstration that an applicant is not bogus.
If you have a bank account with an overdraft, then it will appear in your credit file, meaning lenders can see your current account provider. However, not everyone has an overdraft, so applications tend to ask for this information separately (sometimes including account number/sort code).
Potential lenders will also want to understand whether you have a chequebook, which can be an additional source of credit, as well as if you have any savings. Obviously, savings can be used to ensure that payment obligations are met, and therefore make applicants more appealing to credit card issuers.
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