Why Your Credit Card Application Asks About Bank Accounts
When it comes to applying for a credit card, it can feel like you’re being vetted for top-secret clearance. But the questions that card issuers ask serve a purpose beyond verifying your identity. They want to limit their risk of handing out money to someone who won’t pay it back. So, what can improve your credit card application odds? Having a bank account (or two).
Why do banks care about my savings and checking accounts?
Deposit accounts like checking accounts, savings accounts, and money market accounts aren’t factored into traditional credit scores. However, many lenders have their own credit scoring models and some look for the presence of a savings or checking account as a sign that you’re a lower risk borrower.
How do bank accounts improve my credit card approval odds?
Having deposit accounts can increase your odds of being approved for various types of credit, including credit cards. They indicate to lenders that you’re a safe bet to lend to, especially if you have a nice chunk of money saved in them. Additionally, a preexisting relationship with a bank can increase your chances of getting prequalified or preapproved credit card offers.
Can bank accounts substitute for credit history?
If you have bad credit or no credit history, having a bank account can help you qualify for a credit card. Some credit cards evaluate applications in alternative ways, and may incorporate your banking history into their decision-making process. For example, Petal evaluates cash flow along with your credit history, so you can be approved for a Petal card based on your banking history.
Do I need to have a savings account, checking account, or both to improve my credit card approval odds?
Having either a savings account or a checking account can improve your credit card approval odds. However, having both can be even better as it indicates that you’re managing your money well. Additionally, some card issuers may require you to have a checking account with them before approving you for their credit card.
FAQs
Q: Do I need to have a good credit score to be approved for a credit card?
A: A good credit score is certainly helpful, but it’s not the only thing that credit card issuers look for. Your income, employment status, and other factors also come into play.
Q: Can having a bank account hurt my credit card application?
A: Having a bank account won’t hurt your application, but it may not help as much if you don’t have a significant amount of money saved in them.
Q: Are there any downsides to having multiple bank accounts?
A: There are no real downsides to having multiple bank accounts, but you’ll need to keep track of all of them and make sure you’re meeting the account requirements to avoid fees.
Q: Can I still be approved for a credit card if I don’t have a bank account?
A: Yes, it’s possible to be approved for a credit card even if you don’t have a bank account. However, having a bank account can improve your approval odds and increase your chances of getting prequalified credit card offers.
The Reason Behind Bank Account Inquiries in Credit Card Applications
Getting approved for a new credit card may seem like a daunting task, with questions ranging from employment history to personal finances. But these inquiries serve a purpose beyond mere vetting: credit card issuers want to mitigate the risk of lending money to those who may not be able to pay it back. Credit score, income, and employment status are all fundamental factors for lenders when assessing creditworthiness. However, one often-overlooked aspect is whether an applicant has a savings or checking account.
While not factored into the traditional FICO® Score or VantageScore®, deposit accounts can boost an individual’s chances of approval. According to credit expert John Ulzheimer, many custom credit scoring models used by lenders look for bank accounts as they are viewed as a sign of stability. In addition, a pre-existing relationship with a bank or credit union – established through a savings or checking account – can increase the likelihood of accessing exclusive credit cards and other benefits.
Bank accounts can also help those with bad credit or no credit history qualify for a credit card. For instance, issuers such as Petal evaluate applications through cash flow underwriting or other alternative methods, taking into account bank records alongside traditional credit reports.
In sum, while many factors contribute to credit card approval, having a bank account is essential for demonstrating financial stability and building a positive relationship with issuers – one that can yield benefits beyond simply obtaining a credit card.
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