When someone applies for a credit card, the issuer uses established underwriting policies to make approval or denial decisions — with one key factor being the applicant’s credit score. The underwriter will want to see a predetermined score for a standard credit card approval, but earning a certain credit score can also provide the applicant with the best interest rates, typically through approval of a premium credit card. Individuals in the United States actually have multiple credit scores apiece, with different scores used by various lenders for a range of purposes. Experian notes, howeve…
When someone applies for a credit card, the issuer uses established underwriting policies to make approval or denial decisions — with one key factor being the applicant’s credit score. The underwriter will want to see a predetermined score for a standard credit card approval, but earning a certain credit score can also provide the applicant with the best interest rates, typically through approval of a premium credit card. Individuals in the United States actually have multiple credit scores apiece, with different scores used by various lenders for a range of purposes. Experian notes, however, that 90% of top lenders use a FICO score when making their decisions.
FICO credit scores are calculated via five differently weighted factors. They are someone’s payment history (weighted at 35%), amount owed on the available balance (30%), credit history length (15%), mix of credit types (10%), and amount of new credit (10%). FICO then assigns the individual a three-digit score number and categorizes them appropriately: 300 to 579 (poor); 580 to 669 (fair); 670 to 739 (good); 740 to 799 (very good); and 800 to 850 (exceptional). Each issuer can decide where the person’s score must fall to get credit card approval across the spectrum, from standard cards to premium varieties. For example, GHS Federal Credit Union, which openly lists this information, requires a score from 720 through 850 for premium credit approval. This encompasses the middle of good FICO credit scores and all the very good and exceptional ones. Then, across the credit score range that includes premium credit card approvals, lenders can award different balance limit amounts and rewards.
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How to choose the best premium credit card
a man uses his credit card to pay at a hotel - Drazen Zigic/Shutterstock
When a person wants to qualify for a premium card, but they currently don’t, they may need to build or rebuild their credit scores. Earlier in adulthood, this can involve using tactics like obtaining a secured credit card, perhaps backed by funds in a savings account, and allowing good payment history and responsible usage to shine through. The same process can be used to restore credit scores if someone has experienced financial challenges in life. Once they qualify for a premium credit card, the applicant must determine the best one for their needs. This can involve comparing annual fees alongside the benefits gained — including those provided as a signing-on welcome bonus — how rewards points are accumulated, and how they can be used.
Here are two examples. American Express chargesone of the most expensive annual credit card fees: $895. Whether this is a good deal depends upon how much the card holder uses the benefits they get from it. With the American Express Platinum Card, this can include contributions towards flights and hotels, annual dining credits, Uber cash, and more. Compare those to perks of the $795 Chase Sapphire Reserve credit card. These also have a large focus on flight and hotel benefits, although they’re provided using a different formula. Reading the fine print and envisioning which benefits would suit you best — and deciding if the perks are worth the fees — can help you to make the best decision.
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