Getting denied for a credit card is an experience that no one enjoys. But once you get past the initial frustration, you should try to dig a little deeper. Learning why a credit card issuer turned down your application empowers you to try to fix the situation. With a little work, you might talk the card issuer into reconsidering your application, or perhaps you can improve your odds of qualifying for a different credit card in the future.
Reasons You Might Be Denied When You Apply for a Credit Card
The reason a credit card company denies your application isn’t always evident. But there’s an easy way to uncover more information. You can look over the adverse action letter the card issuer sends you in the mail. As an alternative, try calling the card issuer to request more information about the denial.
In the meantime, here are five common reasons a credit card company might deny your application.
1. Low Credit Score
Credit card issuers use credit scores to help predict the risk of loaning money to consumers. Most credit card companies set a minimum credit score that every applicant needs to meet to qualify for a new account. If your credit score doesn’t meet this minimum threshold, you can work on improving it and try again later — or consider a different credit card option for now.
Solution: Start by checking your credit reports from Equifax, TransUnion and Experian, and the credit scores based on those reports. Once you identify what’s holding your credit score back, you can craft a plan to fix or overcome those issues. Try this free credit improvement guide to get started.
2. Negative Credit History
Certain items on your credit report could also make it difficult to qualify for a new credit card. Recent late payments, bankruptcy, charge-offs, and foreclosures are a few examples of the types of derogatory details that could hurt your credit card approval odds.
Solution: Depending on the card issuer, you might need to wait six months, 12 months, or more from the date of a recent negative credit event before you apply again. But if there are incorrect negative items on your credit report, you can dispute the errors with the appropriate credit reporting agency. Finally, if you have serious credit problems, you might want to consider credit cards for bad credit and build from there.
3. Insufficient Credit History
Having no credit or a thin credit file could also be a problem when you apply for a credit card. When you have little to no credit history, your risk level is unknown. So, it’s hard for a card issuer to predict whether you’re likely to repay the money you borrow as promised. This lack of information may make credit card companies nervous about doing business with you or approving you for certain cards.
Solution: Look for card issuers that are willing to work with credit newbies, like yourself. Student credit cards — like the Chase Freedom Student Card — or secured credit cards may be good types of accounts to consider until your credit history is more established.
4. Income or Debt Issues
When you fill out a credit card application, you must disclose details about your monthly income. The card issuer will compare your income with the existing debts on your credit report. If your debt-to-income ratio is too high, your application might be denied.
Solution: If you can afford to do so, work to pay down your debts starting with high-interest credit card balances. Paying off credit cards could save you money and might improve your credit score as your credit utilization ratio shrinks.
Also, make sure to report all of your income on your application. You can use pre-tax or gross income figures. The CARD Act of 2009 also enables you to include your full household income on credit card applications, not just personal earnings. You might consider calling the card issuer’s reconsideration line if you underreported your income initially and received a denial.
5. Too Many Recent Account Openings or Credit Applications
Some card issuers are sensitive to the number of recent credit cards you’ve opened. Chase, for example, has an unofficial 5/24 rule. If you’ve opened five or more new cards in the last 24 months, the bank will probably deny your application. Too many recent credit inquiries could also cause you problems with some card issuers.
Excessive credit inquiries may suggest that you’re having financial problems or you’re seeking a lot of sign-up bonuses in a short period of time. Either behavior could make you a less profitable customer. Even with excellent credit scores, too many recent account openings or credit inquiries might get your card application denied.
Solution: Credit inquiries only remain on your credit report for 24 months, and they only have the potential to impact your FICO® Score for 12 months. If you need a new credit card before those records age off your credit report, you might want to try a different card issuer that’s less inquiry sensitive.
If you can’t open any new Chase accounts due to the 5/24 rule, you may need to be patient. However, if you’re an authorized user on a credit card that’s been opened in the last two years, getting removed from the account might open up the opportunity to qualify for a new Chase card sooner.
Once you discover why you were turned down for a credit card, you have a few options. Depending on the situation, you may want to call the credit card company’s reconsideration line to see if you can change the outcome of your application. Alternatively, it may be best to go back to the drawing board and research the best credit card offers available for your current situation. When you take the time to research suitable options upfront, you’re less likely to see your credit card application denied.