Applied and denied? Frustrating isn’t it? You’re probably wondering why your application didn’t get the green stamp and what you can do about it.
Many consumers don’t know that banks want to approve you. In fact, they employ an automated machine that does the approvals for them. If you’re approved for a credit card, you’ll typically find out right away. When you’re denied, however, it’s a completely different situation.
Instead of telling, they send the dreaded adverse action letter, within 7-10 business days of your application that gives you all the dirty little details of why your application was denied.
There are numerous reasons your application wasn’t given the green light- some of which can be fixed and later given the approval.
Let’s review them…
Loan balances are too high
Having too much existing debt can make it harder for you to take on a new payment. If your loan balances are high, credit card issuers might be hesitant to give you a credit card. Paying down your loan balances can improve your chances at getting approved.
Credit Card balances are too high
Credit card companies want to see that you’re only using a portion of the credit available to you. If you’re using too much of your available credit, especially if you’re maxed out, you can count on having your credit card application denied.
Keeping your balances below 30% is best for your credit score and your ability to get approved for a new credit card.
Too many inquiries
Applying for too many credit cards and loans within a short period of time can get your credit card application denied, regardless of whether you’re approved for the other credit cards. Limit to 1-2 every 2 years to totally maximize your chances of approval.
The income required for a credit card varies by credit card issuer. Your credit card application could be denied if you don’t make enough money for that particular credit card. Credit card issuers don’t publish minimum income requirements for their credit cards, so it’s up to you to estimate which credit cards fit your income.
Too many credit cards
The number of credit cards you already have can influence whether your credit card application is denied. There’s no universal number that applies to all credit card applications. Instead, it varies by credit card issuer.
Recent Collection or Public Record
As time goes on, collections and public records affect your credit less. However, these hurt your credit the most when they first appear on your credit report. These serious delinquencies are a sign to the credit card company that you don’t have enough money to meet your financial obligations, so it’s always best to clean up your credit reports before applying.
Last Delinquency Was Too Recent
Credit card issuers look at more than just the type of delinquency on your credit report. They also consider how long it’s been since you were last delinquent.
Your recent payment history is a predicting factor on how you’ll handle a new credit account than history from several years ago.
Thin File or Limited Credit History
Your credit card application could be denied if you’ve never had credit before or if you don’t have much experience with credit.
Your credit report must contain at least one account that’s been active in the past six months for FICO to generate a credit score for you. Without a credit score, the credit card company is more likely to deny your application because it can’t gauge your creditworthiness.
If you’re just starting out building credit, consider a secured credit card or student credit card to get your credit history started.
If your application is missing vital information, like a physical address or date of birth, you risk being denied. If you apply with information that does not match your credit file, you risk being denied too.
Unstable work history
Your job history plays a major role in credit decisions. Credit card issuers like applicants who have been on their job consistently. If you’ve been job-hopping and had periods of unemployment, you may have a hard time getting approved for a credit card.
The Bottom Line
If you ever find yourself denied, after you receive the letter in the mail, give the underwriting department a call and request reconsideration. Mostly every bank has a reconsideration line where you can call, explain negative marks on your credit, and possibly get that deny into an approval. It’s worth a try!
Either way, if you’re having a tough time getting approved and need some guidance to start the process towards removing negative marks from your credit, and build flawless credit scores. Feel free to schedule a FREE consultation with our team and we’d be happy to help.