Why Was My Credit Card Application Denied?

Tuesday, January 21st, 2020
Updated: January 21st, 2020
The content is accurate at the time of publication and is subject to change.

When you apply for a credit card, there can be two possible outcomes: you get approved or you get denied. Of course, in case the second option takes place, you are most likely to become confused, disappointed or even angry. These are natural human feelings. However, instead of going to pieces, it is much more efficient to get a grip on yourself and find out the reason for your application rejection.

To clarify why your application was turned down, you typically don’t need to be Sherlock Holmes. Issuers generally send a rejection or adverse action letter within 7-10 business days that explains their negative response. So it just remains to read it carefully. The issuer’s decision may be conditioned by many factors. And to prevent future failures, you’d better familiarize yourself with the most common denial reasons listed below:

Young Age

First of all, remember that you are allowed to apply for your own credit card only when you turn 18 or even 19 in some states. If you are under this age, take your time and start with being an authorized user on one of your parents’ credit card.

Incorrect Application Filling / Paperwork Errors

Missing something or making mistakes on the application form seems to be not so important. Nevertheless, this can be one of the reasons why you are rejected. Fortunately, in such situations, issuers often allow applicants to correct mistakes or/and add the required documents. Still, try to be as attentive as possible to the documentation issues and get acquainted with the requirements in advance.

Low Income

The income you can prove is another factor that determines your success. Issuers don’t share their demands on income with applicants, so you yourself will have to sensibly assess your chances of getting the chosen credit card with your current income.

Abundance of Active Credit Accounts

The number of open credit cards you carry in your wallet can also have impact on the final decision. There is no common number to cater for. Different issuers may set specific rules about how many credit cards, any or issued by them particularly, you can own to qualify.

Too Many Recent Applications

When you apply for a credit card or personal loan, the creditor makes a so-called hard inquiry on your credit report in order to check your creditworthiness. Applying for a lot of credit cards and loans within a short period of time is definitely not a good idea since it may invite suspicions and prevent the issuer from approving you. Again, there is no set number of inquiries permitted. Just do not apply for too many credit offers.

High Entire Balance

Debt-to-credit ratio or credit utilization ratio is one more significant factor that builds up your credit score and affects the issuers’ response. In a nutshell, it is the amount of debt you currently have vs. the amount of credit available. The common recommendation is to spend no more than 30% of the entire balance and of the balance on each of your cards.

Unreliable Credit Background

If you want to be approved for any credit product, in addition to the mentioned above, you should take care of your payment history. Late or missed payments, old debts, collections, bankruptcy, and other derogatory marks on your credit reports make you look like an unreliable and risky borrower who may not meet the financial obligations. But even in case you’ve been doing well with all your accounts, make it a rule to check your reports for errors that decrease your score at least once a year. If you find some, you can dispute them with the credit bureaus.

Insufficient Credit Score

Among other things, it won’t be superfluous to recall that you should make sure you chose a credit card that corresponds to your credit score. If your score is considered bad, do not apply for a card designed for applicants with good credit just on the off chance. Find out what scoring model the credit card issuer uses and investigate its range. If you are new to credit, consider a secured credit card or student credit card to start building your credit history.

 

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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