Credit card use, when handled sensibly, is a quick and simple approach to boosting your credit score. Furthermore, they can help you get through a tight financial spot if you’re in it. In any case, submitting an application for a credit card and actually being granted one are two wholly different things.
There is a common misconception that obtaining a credit card is simple. Lenders may reject your application for a variety of reasons, including but not limited to having an excessive number of credit cards or an error on your application. To increase your chances of approval the following time around, you should figure out why your previous application was turned down.
Factors That Could Make Your Credit Card Application Denied
Application denials for credit cards can occur for a variety of reasons. If a financial institution recently turned you down for a loan, it was probably for one of the following reasons:
1. Information from your application was missing
In order to assess if you qualify for a credit card, financial institutions need to know a lot about you, from your full name and date of birth to your extensive employment history. A mistake or unchecked box is simple to make.
Make sure all of the data you submitted is correct and that you haven’t left anything out before submitting your application for a new credit card. Fill out forms online whenever feasible. In order to complete most online forms, you must first fill in all of the relevant fields.
Take note of any dates listed on your application, such as how long you’ve lived at a particular address or worked for a specific company. If your application is rejected due to a minor mistake, you will need to resubmit it.
2. You’re Too Young
Individual credit card holders must be 18 or older. If you are under 18 years old when you submit your application for a credit card, your application will be denied.
You’ll need a cosigner or to be added as an authorized user to a parent’s or guardian’s credit card in order to apply for your own. You can also try applying for a prepaid credit card, but you might have to put down a security deposit.
3. You Don’t Make Enough Money
The size of your income is a crucial factor in whether or not your credit card application gets approved. Some credit card companies may or may not disclose their minimal income restrictions.
Credit card applications with a low annual income may be declined by some lenders regardless of whether the issuer has a specific minimum income criterion. If your income is inconsistent or you don’t have a lengthy work history, this could happen even if your salary or hourly earnings is above average.
The best chance you have of being approved is if you have a consistent, reliable source of income that has been in place for at least a few months prior to applying.
Credit card companies have different income requirements, so it’s a good idea to contact ahead and find out what they are so your application doesn’t get turned down and your credit doesn’t take a hit.
4. You Have an Unstable Employment History
The success of your credit card application is directly related to the length and stability of your employment and income history. Your employment status is a major factor in determining your ability to pay back loans, so if you have a spotty work history or none at all, you may be rejected.
For instance, if:
- You haven’t worked in a long time
- You aren’t currently employed
- You job hop a lot
- You don’t have consistent job history with one employer or in one industry
Credit card companies, in general, prefer applicants with at least six months of continuous work with their current company. As a result, they will have a better idea of your disposable income and the maximum credit card balance you can handle.
If you’ve been turned down for credit because you don’t have a solid work history, you shouldn’t try again until you’ve established yourself financially.
5. You Owe Too Much Debt
Your credit card application can be declined regardless of your income or length of employment if you already carry a large amount of debt. Creditors may be hesitant to extend you fresh credit if they have reason to doubt your ability to repay them.
Creditors will evaluate your debt-to-income ratio or the proportion of your monthly monetary obligations that you can pay back with your monetary output. In addition, they will look at whether or not you have paid late, the source of your debt, and the total amount owed.
With a higher debt-to-income ratio, credit card approval will be more challenging. Your application may have been rejected because of your high level of debt. If this is the case, you may want to reduce your debt before reapplying.
6. You’ve submitted too many credit card applications Recently
More credit card applications have a negative impact on your credit score. The credit bureau will view each new credit card application as a hard inquiry, which will result in a minor drop in your credit score each time.
As the difficulty of your questions increases, so does the impact they have on your overall grade. As Moreover, financial institutions will view your application as more high-risk the more cards you apply for all at once.
The best practice is to apply for a single credit card at a time. Instead of filling out applications for several different cards, consider your options carefully and then choose the one that best suits your needs.
Apply for a credit card only if you believe you have a decent chance of being approved after carefully considering the card’s interest rate, income requirement, annual fee, and rewards program.
7. You Have a Low Credit Score
If your credit score is low, you won’t be considered reliable by lenders. When deciding whether or not to grant you a credit card, financial companies will take into account a variety of criteria, including your credit score.
Credit reports from Equifax, TransUnion, and Experian all contribute to your credit score. Lenders can get a sense of your borrowing behaviors from a company’s perspective like FICO’s composite score, which is based on data from all three of your reports.
The most common types of credit scores are:
- 800: Nearly perfect
- 750-800: Excellent
- 700-750: Good
- 650-700: Fair
- 600-650: Poor
- 600 and lower: Very bad
There are a number of things that can lower your credit score.
Consider the following as an illustration:
- You have too many recent credit inquiries on your file
- You have an inconsistent payment history
- You have charge-offs on your file
- You’ve filed for bankruptcy in the past
- You have a lot of existing credit card debt
If your credit score is low, you should work to raise it by paying off debts and establishing a track record of on-time payments, and you should also check your credit report for inaccuracies before reapplying.
8. You Don’t Have Enough Credit History
Banks and other lending institutions may be cautious to provide you with an unsecured credit card if you are new to using credit and have a low credit history.
Borrowers can demonstrate their reliability as a debtor by showing a track record of timely payments and responsible fiscal management through their credit histories. If you don’t have a credit history, credit card companies may be hesitant to extend credit for fear of taking on too much of a risk.
If your adverse action letter cites a lack of credit history as the basis for the denial, you should make an effort to establish credit before applying again. You can do this in a few different ways with a cosigner, a secured credit card, or as an authorized user on someone else’s card.
9. Your file shows delinquency or charge-off.
Credit card issuers will take a much closer look at your application if your credit report shows any delinquencies, charge-offs, or collections. Usually, it takes more than 30 days past due for a payment to be noticed as late.
Conversely, debts that have been charged off are those that are overdue by more than six months and that the lender has determined are very unlikely to be recouped. Sometimes collection agencies are brought in to try to get the money back from the people who owe money.
When applying for a credit card, having a history of late payments or charge-offs will look negative on your application. Repair your credit record as soon as possible if you discover any errors.
Make sure you don’t get behind by setting up automatic payments if you have trouble remembering to pay on time. If you’re falling behind on bills owing to a lack of finances, it may be time to reevaluate your financial situation.
While this won’t erase past late payments, it will help you prevent them in the future, which will improve your credit and increase your chances of being approved for a card in the future.
Find out if the lender still has possession of the loan and if there are charge-offs on your credit record. If they ask for money, you should settle the debt as soon as possible. If you need to talk about a payment plan, you can do that, too.
You should get in touch with the collection firm that took over the debt if such is the case. It’s possible you could settle with them if you offered to pay the whole amount owing, as they bought the debt for less than what’s owed.
You can request that the delinquency be removed from your credit report, but unless the lender made a mistake, they probably won’t agree. Despite the fact that most creditors won’t erase delinquency from your credit report simply because you paid it off, doing so will mitigate the damage done to your score.
Authentic delinquencies will remain on your credit report for up to seven years. If you take care of them immediately, they will disappear and your credit score and history will improve, paving the path for you to qualify for new credit.
10. You currently have too many credit cards.
Having a high number of open credit card accounts, even if they are all paid in full, will lower your credit score. There is no hard and fast rule on how many credit cards a person can have, but most issuers have policies that limit the number of cards any given borrower can have at any given time.
To begin, whatever credit you can use could eventually become debt. If you use even one of your credit cards, the total amount of debt you could incur grows exponentially. And if you have more than one card, it can be confusing to keep track of which bill is due when which can lead to missed payments.
Having many credit cards isn’t inherently harmful, but having too many of them can hurt your chances of getting a new one.
Think about what you’d use a new card for and if you can’t make do with a current one before you go through the trouble of applying for one. If you already have a credit card account but would want a different type of card with a lower interest rate or greater benefits, you should talk to your bank about making the transfer.
Steps to Take If Your Credit Card Application Is Rejected
When applying for a credit card and receiving a rejection letter, it’s best to figure out why you were turned down before applying again. It’s important to put your best foot forward whenever you apply for a job, so follow these measures before sending in another application:
1. Review your letter of rejection
If you are rejected and receive an adverse action letter, you should read it thoroughly to learn why. The reasons for a lender’s rejection are frequently given. It is your legal right to inquire within 60 days and receive an explanation for the refusal if no reason was given.
If you know the reasons why you were denied, you can work to increase your chances of being accepted the next time around. In order to improve your chances of being approved next time, you might, for instance, start establishing a credit history, paying down debt, and raising your credit score.
2. Request a duplicate of your credit report.
Keeping an eye on your credit report is sound advice. To avoid unexpectedly low credit ratings when applying for a new card, avoid making late payments by accident.
Federal law guarantees you access to a free copy of your credit report once per year from each of the three major credit reporting agencies through AnnualCreditReport.com (Experian, TransUnion, and Equifax).
The Federal Trade Commission has mandated that consumers have access to a free report from each of the three major credit reporting agencies once every four weeks through the AnnualCreditReport.com website.
At the very least once a year, check your credit report to make sure all the data is accurate and there are no inaccuracies.
3. Delay submitting a new application.
A hard inquiry, such as when you apply for a credit card, will appear on your credit report and will reduce your score. If you have recently been rejected, it is best to wait a while before applying again. When applying for a new credit card, too many queries in a short period of time will lower your chances of being approved.
4. Examine Your Possibilities
Your next steps will depend on the reasons for the application’s rejection. There are times when, for instance, you might need to:
- Improve your credit score
- Build up your credit history
- Fix an error on your credit file
- Pay off existing debt
- Get a secured credit card
- Find a cosigner
- Shop around for a different lender
Maybe you need to wait till you have a longer work history or a more stable income. Itemize the reasons for your application’s denial and the steps you’ll need to take to increase your chances to determine which course of action makes the most sense.
Bottom Line
While it’s never pleasant to have a credit card application turned down, it’s also not the end of the world. You can try applying to a different lender, getting a secured card, or finding a cosigner if you’ve been turned down by the first.
Investigate potential credit card issuers in advance and ensure you confidently meet their minimum requirements to increase your approval odds.
