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Applicants who have a track record of paying their other cards on time are most likely to be approved for new cards.
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updated 6/26/2011 12:48:36 PM ET 2011-06-26T16:48:36

A dollar doesn't seem to go as far as it once did. No longer will a single greenback get you a gallon of gas, a bus ride or a slice of pizza.

Same holds true for the FICO scores that determine an individual's creditworthiness. Before the recession, credit card issuers were extremely eager to hand out plastic, relaxing their standards to the point where it seemed anybody could get their hands on one or more cards. Lately, a credit score of 720 just isn't worth as much as it was in the good old days.

"A score of 720 used to be considered excellent," says Ben Woolsey, Director of Consumer Research at CreditCards.com. "Now, excellent is more like 750. The card issuers have become a bit more conservative and have raised the bar in terms of what they consider good."

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The FICO score — which stands for Fair Isaac Corp., the company that pioneered credit scoring more than half a century ago — encompasses a number of factors that credit card providers consider when deciding whether or not to accept an application. A few of those components sit atop the pyramid.

Be stable
"We review each application situation individually, but more or less it's based on stability," says Tara Burke, spokesperson for Bank of America. "Those factors include employment status, ability to pay, willingness to pay and FICO score."

Credit card providers are reluctant to specify the precise metrics and cutoffs they use — Burke and representatives from Chase, Discover and Capital One all declined to share specifics, explaining such details are competitive information and could be used against them by rivals.

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Still, credit card experts have a general sense of what providers like to see. Perhaps the most important factor is payment history. Applicants who have a track record of paying their other cards on time are most likely to be approved for new cards, says Woolsey. Length of credit and diversity of credit are also important. Another determinant: your debt-to-credit ratio, or debt utilization rate — meaning the percentage of your credit lines you're currently using.

"Providers don't like to see people use more than one-third of their total credit lines, or more than one-third of any one particular one," explains Woolsey. "If you have one card maxed out and two unused, that would be much worse than having the same total spread evenly across three cards."

Students who have no credit history constitutes one group that has seen a particularly sharp decline in credit card offers in the wake of new rules imposed last year by the CARD Act, passed in 2009. Those rules require that applicants under the age of 21 have co-signers, unless they can show they have enough income or assets to justify a credit line. (Those co-signers don't have to be their parents; they simply have to be over 21.) And the CARD Act doesn't specify an income threshold.

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Loophole for young adults
"Whether or not you have enough income is up for interpretation," says Bill Hardekopf, chief of LowCards.com (and Forbes contributor). "That, to me, is a big loophole when it comes to marketing to young adults."

Still, card issuers who still want to court the youth market are finding loopholes in the new rules. For example, the CARD Act banned freebies at college campus card signup tables. So upon making their first purchase, Chase's "+1" student card customers earn enough "Karma points" to redeem for a new coffeemaker in the bank's online store.

What if you're over 21 and earning a living, but still can't get your first card? If all else fails, try bringing a bit of the old-fashioned personal touch to your efforts. Go to the local branch of a bank, meet with a real-life banker, and sign up for a checking account. If your credit score is low (say, because you've never had a credit card before, not because you're a deadbeat) this might be your best chance at getting approved for a card.

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"Relationship banking is a hallmark of our industry," says John Hall, spokesperson for the American Bankers Association. "The more relationships you have with a bank, the better deal you get."

Just don't count on schmoozing your way into a credit card.

"Customers with one or more account relationships could be given more consideration if they apply through a branch of the same bank that issues the card," says Woolsey. "But for most applicants the decision is based purely on credit score."

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© 2012 Forbes.com

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