It’s never fun to find out that a loan application was rejected. When you’re turned down for a mortgage, auto loan, private student loan, or another line of credit, it can make you start to doubt your creditworthiness.
Getting denied for something as common as a credit card can hurt your pride even more.
Your credit may not be the best, and you were just hoping for a chance to get approved and prove to the card company that you can manage using a credit account.
Or maybe your credit score is good, you pay your bills on time, and you already have other credit cards in your name, so what gives?
Quick answer: There are many factors that can cause a denied credit card application. Most commonly, a bad credit score, low income, or high monthly housing expenses are hurting your chances.
Like any loan application, the one you submit for a new credit card also goes through a detailed approval process, and a number of factors come into play that can explain why yours may have been rejected.
Knowing what to look for can help you improve your chances of getting approved in the future.
What Credit Card Issuers Look For
Credit decisions involve some risk-taking depending on behalf of the issuer -- but they aren’t made arbitrarily.
Card companies look at a number of factors before extending a line of credit, so if your application was rejected, knowing the criteria they assess during the credit process can help you make improvements in your finances to increase your chances of getting your next application approved.
A high credit score
Your credit score is the 3-number representation of your credit health. On the FICO scoring scale, credit scores can range between 300 (poor) to 850 (excellent).
Before deciding on your application, a creditor will refer to this number to get an initial snapshot of how creditworthy you may be.
While different credit card issuers have different standards, an above-average credit score of 680 to 700 and above qualifies you for the best credit cards.
A strong debt-to-income ratio
The paycheck you earn isn’t as important to credit providers as your ability to pay your bills.
Your debt-to-income ratio is your total debt compared to your total earnings, one way for a lender/creditor to tell if you can afford to pay your debt.
A ratio with too much debt may tell creditors that you don’t make enough money to pay it off -- one consideration that could see a credit application denied.
Even with a great credit score in place, if you carry too much debt, a potential lender may not trust that you’ll pay them back the money you borrow.
Before a card issuer or creditor makes a credit decision, they’ll check your credit report to see if you pay your bills on time, in full, or if you’ve been delinquent or default on any credit accounts or loans.
Low credit utilization
Your credit utilization -- the amount of credit you use compared to your available credit is important.
Using too much credit may give the impression that you’re relying on your cards too much.
You should aim to strike a good balance of using no more than 30 percent of your credit limit to ensure your best chances of getting approved for a new credit card.
What To Do After Being Rejected
The good news about a credit card rejection is that it won’t take forever to receive a response from the card company.
The bad news is that rejections may come so quickly -- just one to two weeks, in many cases -- that it can seem like your application wasn’t even considered at all.
What does a swift rejection point to? It could mean that upon reviewing your application, it was clear at first glance that you didn’t meet the card provider’s criteria.
But none of this will remain a mystery if you’re rejected for a credit account. When you’re rejected for a new credit line, the card issuer must tell disclose your credit score to you and explain in detail why you were denied.
Reconsideration of your application
This can present a great opportunity to ask for the card issuer to reconsider their decision. Being denied for new credit can still turn around in your favor by taking the proper steps to go from rejected to approved:
Inquire why your application was rejected
You may be able to do this via the card company’s website, by mail, or over the phone with a representative.
Reasons could be because you have no recent history of revolving credit, your FICO score is too low, or that your credit report reflects too many delinquent payments or too much/too little credit usage.
It could be because you opened or closed too many accounts recently, or applied to too many, and your credit score took a hit. Whatever the case, the first step in the reconsideration process is knowing why you were rejected.
Communicate your case
Conveying a sense of financial responsibility goes a long way to making a positive impression on the representative you’re speaking with, putting a voice with the name on your application. Follow some of these pointers to state your case:
Emphasize your commitment to being creditworthy
Tell the card company the good traits as a credit customer that may not come across on your application.
If it’s the first time you’re applying for a card through them, explain that you’re committed to building a solid, long standing credit history with them, and that the card you’ve applied for is the financial tool you’d like to use to get there.
If you’re an existing customer, remind them that you’ve been loyal to their other products and you’d like to continue the relationship.
Examine your options
You may be able to negotiate with the card issuer if it means being having them reconsider their decision. Can they approve you for the card, but grant you a lower credit limit?
Is there a secured option you can work out, like providing a security deposit? Can you take an existing balance and apply it to the new card as a start? Or can using a cosigner be a possibility?
Negotiating may not be possible (depending on the representative), but it could make the difference between getting rejected and being approved.
You don’t need to beg, grovel, plead or con the representative on the other end of line (or, in writing, if it’s via email or snail mail).
Simply being honest and straightforward about giving you a second chance may be all that’s needed to reverse their decision and reconsider granting you a credit card.
A little politeness and respect goes a long way, but remember: don’t be confrontational and demand answers. Your card issuer doesn’t owe you anything.
Who can you call? Here are some phone numbers of major banks and card providers if you’d like to pursue the reconsideration/appeal process:
Credit Card Company Recon Phone Numbers
|Credit card issuer||Contact numbers|
Bank of America
Ways To Improve Your Credit Score
If your credit score was one of the main reasons your card application was rejected, there are a few remedial steps you can take to become a more qualified candidate:
Get out of debt
If you have outstanding balances on one or more credit cards, credit accounts or loans, take the steps to reduce your debt. It’ll show the credit bureaus and future creditors that you can manage your finances, reduce your debt and avoid new debt.
Pay your bills on time
Even if you don’t carry a balance from month to month, late payments can drastically lower your credit score. Payment history and behavior account for 35 percent of your FICO score, so stay on time with your due dates and pay your bills in full.
Avoid applying for too much new credit
Too many credit applications can mean too many hard inquiries to your credit report from card companies, which can lower your FICO score to the point of disqualifying yourself.
Likewise, don’t close too many old accounts, since it can reduce the age of your credit history, another big factor in determining your creditworthiness.
Seek out a secured credit card first
Maybe your credit just isn’t where it needs to be right now to qualify for the card you want.
Try applying for a secured card designed for consumer with poor credit or minimal to no credit history.
You’ll need to front a cash deposit that acts as your credit limit, but use your card responsibly, and you’ll bolster your credit score and report to later qualify you for better, more attractive credit cards you might get rejected for today.
Approval Will Come Soon Enough
Opening up the lines of reconsideration can mean reversing a card company’s decision to reject your application and get the credit card you want in your hands.
Card issuers aren’t looking to turn people down; they want new customers to earn them money.
So if you’ve been rejected, it doesn’t mean you’re not creditworthy, or an irresponsible borrower.
It’s not a reflection of you as a person, your character or your financial habits; it’s just that card companies must follow certain application qualification criteria, and yours may have been rejected for some other reason.
It doesn’t mean you won’t get approved in the future, or that you can’t repeal their decision and reverse the rejection.
All it may take is some knowledge to improve your credit, and your chances, for the next time you apply, and taking advantage of the reconsideration process.
You can make it a win-win situation for you and the card company that’s mutually beneficial and gives you the credit (card) you deserve.