Having your credit card application denied can come as a shock. It's important to know that there are a few factors that go into the issuer's decision to say no.
What to know before applying for a credit card
When applying for a credit card, issuers review your application holistically. That means you should have more than just good credit or a long line of credit history in order to be approved.
Applicants should aim to have both good credit and a long line of credit history. One of the most important factors is your payment history, which determines 35% of your overall score.
After submitting a credit card application, you will typically find out that you were approved on the spot. However, if you are denied, you should receive a letter within 7-10 business days of your application submission date. According to the Equal Credit Opportunity Act, lenders must list specific reasons your application was rejected. If you are familiar with your personal credit history, you may be able to figure out why you were not approved before receiving the letter with one of the below explanations.
Credit report errors
The first step to take before applying for a credit card is to look at your credit report. Check the number of accounts in your name and ensure they're in good standing. If you notice a loan or credit line that you haven't consented to, you may be a victim of identity theft.
To reduce the risk of theft, consider freezing your credit report. During a credit freeze, no new credit accounts may be opened unless the freeze is temporarily lifted (or "thawed"). This extra step makes it harder for scammers to open new lines of credit in your name.
Be on the lookout for reporting errors and inaccurate personal information that are affecting your score. You can check your credit report for free at AnnualCreditReport.com and dispute any errors you find to prevent future credit rejections.
Insufficient credit history
Having a short or nonexistent credit history can make you ineligible for certain credit cards. Your credit report should contain at least one active account to generate a FICO credit score. With no credit history, creditors cannot gauge your creditworthiness and the likelihood that you will pay off your balance.
Credit card newbies should consider alternative options such as becoming an authorized user or applying for a secured card or credit builder loan.
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Low income or unemployment
Credit card issuers don't publish minimum income requirements for their credit cards, so if you do not have sufficient income — or any at all — you could risk being denied. This is because the credit card company cannot see that you have the ability to repay all debts you charge to the card.
If this is the case, be sure to report all sources of income to boost your chances or consider adding a side hustle.
Missed payments
Having poor payment history means you may not be able to repay the outstanding balance, which can also hurt your credit score.
A late payment can drop your credit score by as much as 180 points, according to LendingTree. Depending on the payment, it can potentially stay on your credit report for up to seven years.
Credit utilization is too high
Carrying a balance from month to month indicates that you may not be able to pay your balance in full and may lead to defaulting on your debt. If your outstanding balances are too high, issuers may be hesitant to approve you.
Keeping your credit utilization rate below 30% is the best thing for your credit score because it reveals whether or not you are doing a good job of managing your credit cards and if you are an overspender. Paying off your balances further proves that you are a low-risk customer.
Too many recent credit inquiries
Having too many inquiries on your credit report within a short period of time will result in a credit card application denial. There are two types of credit inquiries: a hard inquiry and a soft inquiry.
A hard inquiry — also known as a hard pull — means that a lender reviews your credit report to determine your creditworthiness for things like a personal loan, auto loan or a mortgage. It will usually affect your score.
A soft inquiry — also known as a soft pull — occurs when you check your own credit report or a creditor checks your credit report to gauge how well you manage your credit. Soft inquiries don't affect your credit score, but they are listed on your credit report.
There is no set number of inquiries that is considered too many, so try to minimize your inquiries in the lead-up to applying for a new credit card.
You don't meet age requirements
You must be at least 18 years old to receive a credit card in your name without a co-signer.
If you are under the legal age, consider asking your parents or someone that you trust to add you as an authorized user to one of their credit cards. (Some exceptions apply depending on the card and issuer.)
You have account defaults
Account defaults result in major repercussions, according to Experian. Defaults indicate that you haven't paid your outstanding debt, which will limit you from obtaining new credit. Some examples of defaults are bankruptcy, repossession, foreclosures and charge-offs. They will be visible on your credit report for up to seven years.
Newly opened accounts
Too many credit applications within a short period of time can be a red flag. If you have opened an account within the past several months, the credit card issuer will need to see more history with your new credit card before deciding whether to grant additional credit or not.
Waiting six months between credit card applications is recommended. Six months is enough time to prove a pattern of creditworthiness.
How to improve your approval chances for a credit card
There are many ways to build credit to improve your chances of approval.
Build your credit
You can apply for a credit builder loan or apply for a secured credit card. You can also use Experian Boost. This feature uses your bank records to find on-time payments for monthly bills that normally are not reported on your credit report. For example, reporting on-time utility, rent and streaming services payments helps instantly improve your FICO score.
Become an authorized user
Becoming an authorized user is a great tool for those building their credit from scratch, especially if the primary cardholder has a long history of on-time payments. In some cases, it can also help you repair your credit as a result of bankruptcy or multiple missed payments. Sometimes, the only requirement is that users must be of a certain age. While most cards have no minimum age requirement, Discover requires all authorized users to be at least 15 years old.
Apply for a secured credit card
Consider applying for a secured credit card. A secured credit card is a great option if you're building or repairing credit or if you're having trouble getting approved for a rewards card. Upon opening any secured card, you'll need to pay a cash deposit that will determine your credit limit.
We recommend the BankAmericard® Secured credit card. This is one of the best cards to help you reach a higher potential credit line. With the card, you will have free access to your FICO score. Another benefit is that Bank of America does periodic reviews of your account. Based on how well you manage the card, you could qualify to have your security deposit returned and continue to use your account without it.
The information for the BankAmericard Secured credit card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Take out a credit builder loan
Consider taking out a credit builder loan, which is a low-risk loan that you may qualify for without credit history. What's more, your payments are usually reported to the three major credit bureaus. It will help you boost your FICO credit score by tracking your phone and utility payments each month.
Bottom line
It can be disappointing to be denied for a credit card or line of credit, but you can try again. Federal guidelines require issuers to give notice of approval or denial within 30 days of submission of an application. So, before anything, keep a lookout for a letter detailing the reason why. Then be patient and fix the problem before applying for another card.
If you happen to disagree with the issuer's decision you may call its reconsideration phone line.
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
