Credit Card Application Denied? Here’s What to Do ImmediatelyYou received an invitation to apply for a credit card. You decided to answer that invitation, and then they rejected your credit card application. What is going on? After all, they invited you to apply. Credit card companies go out of their way to make us feel special in order to get us to apply for their credit accounts. However, getting an invitation does not always mean that you are pre-qualified.
Now, you’re left trying to understand why your credit card application was denied and what to do next. Here’s a bit of information about credit card rejection and some helpful tips to strengthen your credit for your next application.
What to Do If Your Credit Card Application Was DeniedIf you find yourself a little lost, don’t worry. You are not alone! The Federal Reserve released a report in 2018 showing an increase in credit card application denials. This data seems to reflect growing confusion about credit and how to properly use it. So, we want to help out by sharing information to help you understand, repair, and master your credit.
DON’T: ReapplyBefore you reapply or try somewhere else, stop and do some investigating. Being rejected does not hurt your score. However, each new application will add inquiries to your credit. The first one might not have much effect. But if you apply for too many accounts, too many times, too quickly, each inquiry on your credit can cost you. Instead, pause and find out why your credit card application was denied.
DO: Review Your Credit ScoreExamine your credit score as a starting point to understanding any issues a creditor might have with your application. Your credit score is a quick snapshot of your credit health. Some banks and credit companies allow access to your FICO or Vantage scores as an added customer benefit. If you don’t have access to these services, you can apply to various credit bureaus to get your score and complete reports. Some online services offer the ability to request and monitor your scores, but always be extremely careful when sharing any of your personal information online.
DO: Request Your Free Credit ReportYou can request copies of your credit report through various credit entities. Your credit report is a living record of all of your credit accounts and credit history. Did you know you are entitled to a free report every year from each of the three major credit bureaus? The big three bureaus are: Experian, TransUnion, and Equifax. You are also entitled to a free copy whenever your credit application is denied. Make sure you take advantage of the opportunity and order your report. Review it for errors, dispute any incorrect information or fraudulent activity, and find areas where you can improve your credit habits and repair your credit.
DO: Read Your Adverse ActionCredit reports and scores are great information. But they might not reveal the story of your most recent rejection. Credit companies are required to issue a Notice of Adverse Action for any credit denial. They may call you, but generally, they mail or email this notice within a few days. When you receive your Adverse Action, you can understand which credit report they used and what information they found that did not meet their credit criteria. This is normally a great starting point to fix the problem.
What Was the Reason My Credit Application Was Rejected?There are a variety of reasons you may have been turned down for a credit card. When you review your Adverse Action, you’ll find a list of reasons for your credit card application denial. Here are a few:
1. Your Credit Score Was Too LowEach credit card account comes with a required credit score range. If your personal score is on the lower end and you are applying for a premium card, for example, your score won’t fulfill the minimum score for approval. Research cards that fit your credit score range and you may find greater success.
2. Too Many Recent Accounts or ApplicationsThis means you have applied for or received too many credit accounts in a recent timeframe for the lending policies of the creditor. Credit issuers each have different rules and limits. But the majority are wary of applicants who have opened too many accounts or applied too many times. You may be able to find the limits and policies on the credit application for most lenders. And generally, you can wait three to six months before reapplying.
3. Credit Issuer Not Issuing Any New CreditGenerally, the credit limit a credit issuer will extend is based on income. Once you reach that limit, they may deny any new applications. For example, let’s say a bank allows a $10,000 limit based on your income. You already have two $5,000 credit cards with them and you want to apply for a third. Even if the balances on your two existing cards are low, the bank may still deny your application. In this situation, you may want to call your creditor. If your balances are low, you can ask for a credit reduction on your current accounts, lowering the extended credit and possibly opening the opportunity to apply for the new card.
4. Open Balances Are Too HighIf you are carrying high balances on other loans and cards, creditors will often deny you more credit. Those high balances may be seen as too risky. You may want to pay these down before applying again.
5. Income Is Too LowYour income plays a large role in your credit application success. You don’t have to earn great amounts to qualify for credit, but different cards have different requirements. It’s important that you apply for credit accounts that fit your income range. Do some research to find cards that match your income level before you apply again.
6. Not Enough Credit HistoryWithout a credit history, creditors cannot know if you will be a good credit user. Having too little credit is one of the biggest problems some people face when applying for a new card. The problem is hard to solve— you need credit history to get credit accounts, but you need credit accounts to have a credit history.
7. Negative Items on Your Credit ReportMissing a payment or defaulting on an account can affect your ability to apply for new credit accounts. If the negative behavior was less significant or farther back in your history, it may not impact your success. However, if it was significant or recent, you may not be able to get credit when you need it. Creditors typically look for applicants who make payments on time and manage debt responsibly.
Remove False Reports from Your CreditIf you feel there has been a mistake, you can request your credit record for review and report misreported items. Removing falsely reported negative items from your report is an ideal way to improve your application success and improve your general credit health. If the negative items are accurate, however, you may have to wait six months to a year, or longer, to reapply.
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