Is it time to get a new card for your wallet? Applying for a new credit card may come with uncertainty and some questions, like: Will I get approved? How will it affect my credit score?
You may even worry that it won't be worth the risk to your credit since getting rejected by a lender could cause a temporary drop in your credit score.
This is why there has been so much interest in credit cards marketed as "no-risk." But what does this mean exactly? Read on to learn more about how these credit cards work and which card may be best for your financial goals.
What are no-risk credit cards?
No-risk credit cards use a pre-qualification process to let you know if you'll be a good fit for a card before you apply. This insight can help you avoid applying for cards that may reject you and put your credit score at risk.
Here's how they work: Credit card companies use a soft credit check to estimate if you'll be approved, a process called "pre-approval" or "pre-qualification." These soft credit checks don't hurt your credit score, so there's no risk to see if you'll likely be approved.
Then, if you pass the pre-qualification, you can go on to make the formal application with some assurance you'll get approved. The application asks for more information and may even ask you to provide income documentation. At this point in the credit application process, the credit card company does a hard credit check (which temporarily affects your credit score), but the end result is a new credit card.
What are no ding decline cards?
No ding or no decline cards are an offering specifically from Experian, the credit reporting agency that also offers credit monitoring and card marketing services. They promote some cards on their site as "no ding," with the same premise as no-risk credit cards.
However, the no ding may only apply to Experian credit reports and credit scores. There's no certainty that the credit inquiries won't show up on the other two credit agencies: TransUnion and Equifax.
The site also states in the fine print that "Applying for cards labeled 'No Ding Decline' won't hurt your credit scores if you aren't initially approved. Approval of your application will result in a hard inquiry, even if you're unable to pass final verifications, which may impact your credit scores."
This means that there's still a chance of not getting a card after getting to the final verification stage after the hard credit check has taken place.
The benefit for those using the no ding card features is that they can see card offers tailored to their score based on the information they provide to Experian (like their Social Security number). With the most likely cards to approve showing as "no ding," consumers can avoid applying for cards they don't qualify for and focus just on cards that are a good fit.
While this match-making can result in more approvals, the truth is that it only guarantees you won't get dinged on the first stage of the application process. For consumers who must provide additional information (such as self-employed applicants needing to show tax returns to verify income), the no-ding policy won't protect them in the final stages.
Why? If you are approved (even conditionally), the issuing bank will perform a hard inquiry as part of its standard underwriting and risk assessment process before giving a formal decision. Experian does not control the credit issuer's internal processes, but this final verification is almost always part of their approval (or denial).
Also, the Experian site specifically says it won't affect your FICO score, based on the FICO Score 8 model. However, lenders may use other score models, which aren't affected by this "no ding" promise. Experian doesn't control the scoring models from other agencies.
Comparing no-risk cards vs no ding decline cards
When it comes to finding the right credit card, you have a few options. You could go in search of the cards yourself and try their pre-approval services to see if you might get a "yes." A few ways to learn about cards is to check your mail for card offers or to ask your bank what cards they issue. Friends and family are another good way to learn about cards with valuable perks and reward programs.
Currently, there are a handful of no-risk cards on the market that let you input some basic information and agree to have a soft credit check done, and you'll know right away if you're likely to be approved.
If you'd like a bit more guidance on cards, you could also try Experian's no-ding marketplace. You need to create an Experian account. If you don't have one already, then log in to see your offers.
Note that Experian partners with many of these cards and makes a commission when someone applies through their suggestion. They may or may not be the best card for your financial goals, even if you are very likely to be approved. They are also a limited representation of all of the cards available today. To see a wider range of options, you will have to do outside research by asking those you know or doing an online search for the card features you want most.
Consumer tips when shopping for a no-risk credit card
Whether you choose a no-risk or no-ding card to apply for, there are some additional things to keep in mind.
1. Look at all the card terms
Card offers are designed to show the best features first, and they often leave the card's downsides in the fine print. Read every page of a card offer, including the small words at the bottom of the page and any pop-ups that appear. This language can alert you to things like approval odds, bank regulations, and additional fees. Take your time and make sure you understand everything about the card before applying.
2. Understand the risk
Both no-risk and no-ding cards promise not to run a hard credit check during the initial part of the application process. However, a hard credit check will be run before the final application goes through, leaving a small risk to your credit score.
3. Read customer experiences
While you can't believe everything you read on the internet, some consumers have shared their experiences with the no-ding and similar card programs. Whether they had rave reviews or had surprising outcomes, it never hurts to see what others have to say about applying for credit. You can do a Google search or check financial forums for examples of real-world situations.
4. Know your score before you apply
The best way to reduce risk to your score is to have a good idea of whether you'll get approved for the card before you apply. You can check your credit report from each of the three agencies once per year. In fact, this is a healthy financial practice even if you don't plan on applying for a card. If you see anything surprising, dig further to find out why. Credit reports can tip you off to fraud or other illegal practices, and you'll want to get these issues taken care of before you apply for your next card. (You can always contact the reporting agency directly about any errors.)
5. Keep being smart with your credit
Finally, whether or not you plan on applying for an "easy" card, you should still consider how you can nurture your credit score. Things you can do to boost your credit score include:
- Continue making on-time payments
- Paying down balances each month
- Having on-time payments from rent, cell phone, and other bills reported to credit agencies
- Not using all of your available credit
If you're looking to apply for a new card in the near future, avoid applying for any other credit (like car loans or a bank line of credit). Since applying can make your score dip a few points, you want to have the highest score possible when it comes time to fill out that application.
Pre-approval on your own terms
With the new "no ding" approach to pre-qualification, credit cards may be more accessible to those who are usually cautious about applying. The marketing that Experian does can be a valuable shortcut, especially if a consumer already uses and loves their credit monitoring and card marketplace features.
However, many cards have a similar "no risk" approach, and you don't need to go through Experian to learn about them or even apply. In fact, any pre-approval offer you get in the mail or learn about through a web search likely has a pre-qualification process. Check the card terms to be sure, but it's highly likely that you can see the approval status, card limit, and even interest rate without having to go through the entire approval process and risk your credit score.
In the end, you may find that the best card for you won't come from a no-ding marketplace. Ask yourself questions like:
- How much credit do I need?
- Will I want cash-back or other reward perks?
- What is the annual fee?
- Do I qualify for a card without a security deposit?
Your answers can guide you to the best card offers, ding or no ding.
