After a credit card application has been submitted, the credit card company, as a rule, carries out a credit search on the applicant so as to ascertain whether he/she is a good risk or not. The credit search will show if the applicant has made prompt payment(s) on his/her mortgage(s)/ personal loan(s)/ credit card(s) etc. Through the complex process of credit scoring, the credit card company will form an opinion on the applicant, based solely on this credit search. If in case the applicant’s credit history shows up in unfavourable light (through missed payments and the amount of debts accrued), the credit card company might not view him/her as a good risk. However there are other factors that also determine the credit score and they are whether the applicant is a homeowner, his/her marital status, he/she is employed or self employed. The consideration of all these factors contribute to the determining of whether the applicant is a good credit risk and what type of credit limit will be imposed on him/her.
And even if the applicant has never had a credit history, he/she will still not be classified as a good risk since there is no tangible way of knowing whether he/she will meet financial commitments on time.
Now the burning question is will an applicant (with either a bad or no credit history) be eligible to obtain a credit card? The answer is a definite yes but the interest rate will be much higher to reflect the degree of risk involved. However if the applicant takes steps to repair/show his or her credit worthiness, the credit card company will, in due course, offer a more competitive rate.
