“We regret to inform you that after careful consideration we are unable to open an account for you at this time.”
Heard that before? If so, you may be feeling down on your luck or in a panic to get another form of credit elsewhere. But before you freak out, think about why the credit card issuer may have denied you.
Do you have lengthy credit history? A decent credit score? Solid income and employment? If you don’t know the answer to these basic questions, you shouldn’t be blindly applying for credit cards.
Why Was My Credit Card Application Declined?
When you apply for a credit card, you provide certain information to the issuer, including your basic personal details (name and address), along with your total annual income (stated) and employment status.
Many credit card issuers also ask if you rent or own your place of residence, and how much you pay each month.
Additionally, they ask if you have any checking and savings account, and some now ask what the balances are in said accounts. Oh, and if you have any investment accounts, such as a 401k or IRA.
Over time, credit card issuers have been inquiring a lot more. It’s not nearly as robust as a mortgage application, but credit card issuers are upping their game quite a bit.
Finally, they ask that you provide your social security number so they can run your credit.
This is a key piece of the process that allows them to tie everything together. Even though your income and assets won’t show up on the credit report, they will be able to see employment records, along with a physical address to connect the dots.
They’ll also be able to peruse the existing accounts on your credit report to see if your stated income and assets line up.
If you claim to make $250,000 a year as a self-employed who knows what, but only have a single credit card account with a $1,000 credit limit, they might scratch their head.
Even if everything makes sense, you could still be denied a credit card. For example, if you’ve already got multiple credit cards with large balances, new issuers will probably shy away from you.
After all, if you’re not paying down those balances, it could indicate that there’s trouble in paradise.
Why would someone making a ton of money at a steady job carry a bunch of credit card debt? They wouldn’t, which is why consumers with such credit profiles are deemed high risk, and more likely to be denied.
Reasons to Be Denied a Credit Card
- Low credit score
- Prior late credit card payments
- Major delinquencies such as a collection or charge-off
- Limited credit history
- Insufficient income
- Lack of employment or limited employment
- No checking or savings accounts
- Too many existing liabilities (monthly bills)
- Too much outstanding credit cards
- Too much outstanding debt
- Too many recent inquiries for new credit
- Too young (age requirements)
- Application discrepancies (incorrect information)
- New address (this can simply delay the process and prompt a call from the issuer)
What to Do If You’re Denied a Credit Card?
Sure, the credit card issuer denied you, but opportunity awaits. Stop, think, and turn bad news into good news.
Every time you are denied credit for any reason, you have the right to know what credit-related information the issuer received that led to the decision, as well as the right to request a free credit report from the agency listed on your denial notice.
This is one of the many statutes contained in the Fair Credit Reporting Act, which affords certain protections to consumers regarding credit.
You’ll also see the name of one of the three credit reporting bureaus, along with all the accompanying contact information on the letter, making it easy to make the request for a free credit report.
There will also be a reason or two listed as to why you didn’t qualify for the credit card. This information is gold if you want to better understand what determines your FICO score.
If you choose to obtain the free credit report you’ll also be able to dispute any information contained on the report to ensure it’s accurate. This is a great opportunity to review your credit history and determine what needs to be fixed or cleaned up.
So in essence a decline letter doubles as a free credit report, the ability to dispute anything on your credit report, and a lesson in credit reporting. Some issuers now provide the credit score used as well so you can see where you stand.
Not bad for a declined credit application, right?
Once you review the possible reasons for denial, you can take action to resolve any issues. If nothing seems to be too bad, it could just be that the credit card issuer you applied with is ultra-conservative.
You might find that other issuers are more willing to approve you, so don’t just assume that if one issuer denies you the rest will as well.
Credit underwriting decisions will vary immensely from issuer to issuer, which is why you’ll often see things like “good credit needed” or “excellent credit score required.”
Just don’t keep applying for credit cards over and over as that will hurt your credit score and lead to a bunch of hard inquiries on your credit report, lowering your chances of approval in the future.
I was denied for a Chase credit card even though I have a 700+ Fico score and no late payments. What gives?
I can’t say for sure, but consider the other reasons I listed, such as too much outstanding debt, or too many other credit cards. You can still be seen as risky to credit card issuers even if you do nothing “wrong.”
I got approved for a Citi card, but with a $500 credit limit. Are you kidding me Citi? Why even approve it. Might as well decline me and save me the hassle of canceling.
Same thing happened to me. Approved but with a paltry credit limit. Why even waste our time? Now I have to cancel and deal with the credit hit. Boo!
I didn’t get declined, but I didn’t get approved either. Is that a bad sign? It says I’ll get something in the mail regarding my application.
Not necessarily a bad sign. I’ve had credit card applications where I was instantly approved and also some where I was told my decision is pending (or some other language). If the latter happens, I immediately call and ask for status. Typically a phone call gives the issuer peace of mind to approve your application as long as everything makes sense. Sometimes they’ll ask you further questions, sometimes they won’t. Either way, prepare yourself before you call.