Using credit cards responsibly is one of the fastest and easiest ways to build your credit score. And, if you’re strapped for cash, they can see you through a financial rough patch. But applying for a credit card and getting approved for one are two different things.
Contrary to popular belief, credit cards aren’t always easy to get.
There are many reasons a lender may send you a rejection letter, from having too many credit cards to making a mistake on your application. Before applying for another card, it’s important to understand why your application was denied and what you can do to improve your chances for next time.
Reasons Why Your Credit Card Application Might Be Denied
Credit card applications can be denied for many different reasons. If you were recently rejected by a bank or lender, it’s likely due to one or more of the following common reasons:
1. Your Application Was Missing Information
Banks and lenders require a lot of information to determine your eligibility for a credit card, from your full name and date of birth to detailed employment history. It’s easy to make a mistake or forget to check a box.
Before submitting your application for a new credit card, review it carefully to ensure the information you’ve entered is accurate and that you haven’t missed anything. When possible, fill out applications online. Most forms won’t let you submit your application until all the required fields have been filled out.
Pay specific attention to any time frames outlined in your application, such as how long you’ve lived at a specific address or worked for an employer. Small details can make or break your application, and if you’re rejected due to an error, you’ll have to reapply.
2. You’re Too Young
In order to be the sole cardholder for a credit card, you have to be 18 or over. If you submit an application to have your own credit card and you’re under age 18, your application will be rejected.
In order to get a credit card, you will need a cosigner or to be listed as an authorized user on a parent or guardian’s card. You may also be able to get a prepaid credit card, but you will have to put down a security deposit in order to obtain one.
3. Your Income Isn’t High Enough
Income plays a major role in whether your credit card application is approved or declined. All credit card issuers have minimum income requirements, which they may or may not share with you.
The requirement varies between cards and financial institutions, and if a lender considers your income to be too low, it will likely result in credit card denial.
This is also a possible outcome if you have unstable income or not enough job history, even if your salary or hourly wage is above average.
Having stable, reliable income for at least a few months before applying gives you the best chances of being approved. You can also call credit card lenders in advance to ask about their income requirements, which will save you from having your application denied and a ding on your credit report.
4. Your Employment History is Unstable
Your income and employment history go hand-in-hand when it comes to a credit card application. Your job directly affects your income, which means your application may be denied if you have limited or sporadic job history.
For example, your job history can impact your credit card application if:
- You haven’t worked in a long time
- You aren’t currently employed
- You job hop a lot
- You don’t have consistent job history with one employer or in one industry
In general, many credit card issuers like to see at least six months of employment history with the same employer. This helps them to gauge your long-term income and what (if any) balance you can afford to carry on a credit card.
If you’re denied credit due to a lack of job history, wait until you have a stable job and consistent income before reapplying.
5. You Have Too Much Debt
Even if you meet any income requirements and you have long-term job history, your credit card application can still be rejected if you have a lot of existing debt — including credit card balances. Lenders may be hesitant to provide you with any new credit because they’ll be concerned about whether you can afford to make additional payments.
Financial institutions will consider your debt-to-income ratio, which is the percentage of debt you have compared to your monthly income. They’ll also review other factors, such as whether you’ve maxed out your credit limits, where your debt is from, and whether you have made any late payments.
The more debt you have, the harder it will be for you to get approved for a new credit card. If your application is denied due to the amount of debt you have, consider paying some of it off before trying again.
6. You’ve Applied for Too Many Credit Cards Recently
The more credit cards you apply for, the more your credit score will be affected. Each time you send in a new credit card application, the credit bureau counts it as a hard inquiry, which means it shows up on your credit report and typically causes a slight decrease in your overall credit score.
The more hard inquiries you have, the more they will lower your score. And, the more cards you apply for at once, the riskier your application looks to banks and lenders.
Ideally, you should only apply for one credit card at a time. Instead of applying for multiple cards, shop around before you submit any applications and select the one you want the most. Review interest rates, income requirements, fees, and rewards programs to determine which card is best for you and only apply when you feel like there’s a good chance you’ll be approved.
7. Your Credit Score is Too Low
Having a bad credit score directly impacts your creditworthiness. While most financial institutions will consider a number of different factors when it comes to evaluating your credit card application, your credit score will most definitely play a part in whether you get approved.
Your credit score is based on your credit reports from the three major credit reporting bureaus: Equifax, TransUnion, and Experian. Companies like FICO take information from all three of your reports and generate an overall score to give prospective lenders an overview of your borrowing habits.
In general, credit scores break down as follows:
800: Nearly perfect
750-800: Excellent
700-750: Good
650-700: Fair
600-650: Poor
600 and lower: Very bad
Many factors can hurt your credit score. For example:
- You have too many recent credit inquiries on your file
- You have an inconsistent payment history
- You have charge-offs on your file
- You’ve filed for bankruptcy in the past
- You have a lot of existing credit card debt
Before you reapply, try to rebuild your credit score by paying off debts and building a history of timely payments, and check your credit report for errors.
8. You Don’t Have Enough Credit History
If you’re new to using credit and have limited credit history, banks and lenders may be hesitant to offer you an unsecured credit card.
As a borrower, your credit history acts as a way to demonstrate your ability to make payments on time and handle your personal finances responsibly. Without any credit history, financial institutions will have a hard time determining how great a risk they’ll be taking by offering you a credit card — so they may simply deny you.
If your adverse action letter states your limited credit history as the reason for your rejection, work on building your credit history before trying again. You can do this by opting for a secured credit card, asking someone to act as your cosigner, or being added as an authorized user on someone else’s credit card.
9. You Have a Delinquency or Charge-Off on Your File
Late payments that result in delinquencies or charge-offs on your credit report have a major impact on your credit score and are red flags to credit card lenders reviewing your application.
Late payments typically don’t show up until they are more than 30 days overdue.
Charge-offs, however, are debts that are more than six months overdue and that a lender has officially designated as unlikely to be collected from a borrower. In some cases, these debts are sold over to collection agencies, which then pursue the borrower for repayment.
Late payments and charge-offs are both bad for your credit score and seriously hurt your chances of getting approved for a credit card. If you have any that show up on your credit report, you should take care of them immediately.
If you have a tendency to miss payments due to forgetfulness, set up automatic payments. If you’re late on payments due to a lack of funds, rework your budget if possible. While this won’t undo any late payments already on your file, it will help you to avoid them in the future, which will up your chances of getting approved when you apply for a card in the future.
If you have charge-offs on your credit report, determine whether the lender still owns the debt or not. If they do, pay it off as soon as you can. You can also call them to discuss a repayment plan.
If a collection agency has purchased the debt, you’ll need to contact them to discuss your options. Because they likely purchased the debt for less than the amount owed, you may be able to negotiate a settlement with them if you offer to pay the amount in full.
You can ask a lender to remove the delinquency from your file, but unless it was due to an error, your chances of success are low. Most lenders won’t remove the delinquency from your credit history just because you paid it off, but repaying it will keep it from affecting your credit even more.
Unfortunately, legitimate delinquencies will stay on your credit report for up to seven years. The sooner you address them, the sooner they’ll go away, allowing you to apply for new credit once your overall credit rating and history have improved.
10. You Have Too Many Credit Cards Already
Having a number of different credit cards can negatively influence your credit score, even if they don’t carry a balance. Although there’s no fixed limit on how many credit card accounts you can have, most credit card issuers set limits on how many cards they’ll allow a single borrower to have open when they consider an application.
For starters, your available credit counts as potential debt. The more credit cards you have, the more potential debt you can carry if you do use them. And, having multiple cards can make it difficult to track which line of credit is due when, increasing your chances of making late payments.
While it’s not necessarily bad to have more than one credit card, having too many may impact whether you’ll be approved for a new one.
Instead of applying for a new card, consider what you need it for and whether you can use one of your existing cards instead. If you want a card with a lower interest rate or better rewards, talk to your bank about switching your existing account over to a different type instead of applying for a new card.
What to Do if Your Credit Card Application is Denied
If you receive a rejection letter after applying for a credit card, it’s important to consider the reason before trying again. Take the following steps before submitting another application to make sure you put your best foot forward:
1. Read Through Your Rejection Letter
When you receive your adverse action letter, read through it carefully to determine the reason behind your rejection.
Most lenders typically tell you why they decided to reject your application. If they don’t cite a specific reason for the rejection, you have the legal right to ask within 60 days and receive an answer. Understanding why you weren’t approved shows you how you can improve your chances next time.
For example, you can work on building your credit history, paying off debt, and improving your credit score before trying again.
2. Get a Copy of Your Credit Report
In general, it’s a good idea to keep an eye on your credit report. This helps you to avoid accidental delinquencies and surprisingly low credit scores when you apply for a new card.
By federal law, you are entitled to a free copy of your credit report through AnnualCreditReport.com, which includes reports from the three major credit bureaus (Experian, TransUnion, and Equifax).
Currently, you can get a free report online each week from all three national credit bureaus by using the AnnualCreditReport.com website, which is authorized by the Federal Trade Commission.
You should review your credit report at least once per year to ensure the information is correct and that there are no mistakes or errors on your file.
3. Wait Before Applying Again
Each time you apply for a credit card, a hard inquiry shows up on your credit report and lowers your credit score. If you’ve recently received a rejection, give it some time before applying again. Too many inquiries in a short period of time can affect your eligibility for a new credit card.
4. Review Your Options
Depending on why your application was rejected, you’ll need to come up with an action plan. For example, you may need to:
- Improve your credit score
- Build up your credit history
- Fix an error on your credit file
- Pay off existing debt
- Get a secured credit card
- Find a cosigner
- Shop around for a different lender
Or, you may simply need to wait until you have a longer job history or more consistent paychecks.
Consider which option makes the most sense based on why your application was denied and what you need to do to improve your standing.
Final Word
Having a credit card application be denied doesn’t feel great, but it isn’t the end of the world. Although one lender may have denied you, you can explore other options like applying through another bank, getting a secured card, or finding a cosigner.
To improve your chances of being approved, research credit card companies in advance and make sure you feel confident you meet their minimum requirements.
