If you keep submitting credit card applications only to have them rejected, you might be wondering what’s going on. Credit issuers are compelled to notify you exactly why they refused your credit card application, according to the law introduced in the 1970s—so if you wait a week or so, you’ll get a letter detailing why your application was rejected.
Of course, just because you’ve read your adverse action letter doesn’t mean you’re not still confused. Is it true that being refused a credit card hurts your credit score? Can a secured credit card be denied? How can you increase your chances of acceptance?
Let’s take a closer look at what you can do if your credit card application is turned down, so you can go from “credit card denied” to “credit card accepted.”
The most common reasons why your credit card application may be declined
When you apply for a credit card, you normally find out within a few minutes whether you’ve been accepted or denied—but it might take up to two weeks to find out why. Lenders are obligated by the Fair Credit Reporting Act to explain why they declined your credit application. This is known as an adverse action notification (or adverse action letter), and it should arrive within seven to ten business days of your rejection.
Here are some of the most prevalent causes of credit card denials.
Your credit score is insufficient.
Credit cards are routinely declined because the applicant’s credit score is too low. Each credit card has a suggested credit score range, and if your credit score is not high enough to fit within that range, your credit card application may be denied.
Following steps: Check your credit score before applying for your next credit card. Determine where you fall on the FICO and VantageScore credit score scales—is your credit awful, fair, good, or excellent?
Additionally, view this as a chance to enhance your credit score. You may do this by, among other things, keeping up with payments on current credit accounts, decreasing your credit usage rate, and not applying for new lines of credit frequently.
Your earnings are insufficient.
In many circumstances, you must declare your salary and monthly housing payment on your credit card application, and lenders may determine that your income is insufficient. While people of all income levels can use credit responsibly, a credit card issuer may view low income as too big a risk factor, especially when paired with large rent or mortgage payments.
Following steps: Your income might influence your chances of getting approved for a new credit card, but it’s not always apparent what a lender would consider income. On a credit card application, you can normally use the following sources of income:
- Government help
- Insurance premiums
- Child maintenance
- Spouse’s income
Finally, if you are a college student working part-time, you may have problems obtaining a credit card. Consider a secured credit card, becoming an authorized user, or applying for a student credit card if this is the case. A student credit card is an excellent method to establish good financial habits, and most credit cards made for students do not require a credit history.
You have a poor credit history.
If you’ve missed several credit card payments or had run-ins with debt collectors, a lender could be hesitant to provide you with a new line of credit. People with a lot of negative marks on their credit records, whether from missed payments, collections, foreclosure, or bankruptcy, may have a difficult time getting new credit cards.
Next steps: You can’t remove late payments from your credit report, but if you prioritize credit rebuilding, you might be able to discover a credit card tailored for people with bad or fair credit to help you get the job done. Some of these credit cards are secured, while others are ordinary credit cards that do not need a security deposit. These cards often have limited credit limits and hefty interest rates, however, some do provide cash back benefits. After routinely paying your bill balance on time, you may be eligible to migrate from a secured card to an unsecured card.
The more you understand why credit cards are refused. What you can do to increase your chances of acceptance, the better your odds of selecting the correct credit card for your credit score, income level, and financial objectives will be. If your previous credit card application was declined, utilize this information to strengthen your future credit card application. That is how you go from “credit card declined” to “credit card approved.”