Have you been rejected for a credit card application?
While rejection hurts, don’t let the frustration keep you from finding out why you were denied. You can then learn where you can improve next time you apply.
Above all, you must know that you’re not alone. Far from it!
In 2020, 21% of U.S. consumers had a credit card application denied. During that time, nearly one in five millennials were unable to access a credit card.
Here are ten potential reasons your credit card application didn’t get approved.
1. You’re Too Young
To obtain your own credit card, you must be at least 18 years old.
If you’re younger than that, your application will be automatically denied.
Fortunately, your parents can add you as an authorized user on one of their credit cards. This will give you the financial freedom you’re looking for, and help you build your own credit history along the way.
Once you turn 18, getting a credit card can be a breeze.
2. Your Credit Score Is Less Than Stellar
Some credit cards are easier to get than others.
For example, many rewards cards will require a good FICO® score in order to be approved. That means your credit score will need to be at least 670.
If your credit score is below that threshold, you may need to apply for a different card.
3. You Have Past Delinquencies
Your payment history accounts for over 35% of your total FICO® score.
Unfortunately, even one missed (or late) payment could severely affect your credit score, and ultimately prevent you from getting approved for the credit cards you want most.
Note: late payments generally stay on credit reports for seven years—even after you’ve repaid them.
4. You Carry High Balances on Credit Cards (Or Loans)
If you get overextended on credit cards, most lenders will see it as a red flag.
Generally speaking, borrowers with a low debt-to-income ratio (DTI) will have the best access to credit.
Most financial advisors encourage users to limit their DTI to about 30%.
For example, if you make $5,000 a month, your total debts should not exceed $1,500 (30% of your net monthly income).
If you were recently denied a credit card, consider reducing your current debt balances and payments before reapplying.
5. You Have Insufficient Income
Age isn’t the only barrier to credit cards.
Having a limited income can be equally restrictive.
In most cases, credit card issuers won’t request an income statement from applicants. However, if you’re in college or are new to the workforce, it may be difficult to get a credit card right away.
Keep in mind that your income isn’t limited to the funds in your bank account. In fact, your financial aid, insurance payments, investments, and even your regular allowance can all count on a credit card application.
6. You Recently Opened a New Credit Card
Contrary to what you might expect, opening a new credit card or obtaining a fresh loan will actually lower your credit score—at least for a short period of time.
Here’s why: every time you apply for a loan product, lenders will run a “hard” inquiry on your credit history.
Each time this happens, your FICO® score will be negatively impacted.
If you have multiple hard inquiries in a short period of time, lenders might think you’re struggling to manage your debts and likely deny any additional applications.
7. There Is Fraud (Or Inaccuracies) On Your Credit Report
While credit reports are important documents, they’re far from perfect.
In fact, one-third of Americans found at least one error on their credit reports last year.
Unfortunately, most lenders won’t take the time to flag mistakes on your credit report. You’re the first (and last) line of defense for your credit history.
In order to access the credit cards you need, make sure you carefully review your credit report. If you notice anything wrong, here’s how you can dispute it.
Here’s the good news: federal law entitles you to a free credit report every year from Equifax, Experian, and TransUnion.
To get started, simply go to AnnualCreditReport.com (or call 877-322-8228 to get started).
8. You Didn’t Fill Out the Application Correctly
Small mistakes can make a big difference.
That’s especially true if you accidentally entered incorrect information on your credit application.
When it comes to lenders, one wrong keystroke or inaccurate number can make all the difference between an acceptance or a rejection.
If you believe you made a mistake on your application, request that the card issuer reconsider your application (or resubmit it entirely).
9. Your Credit Report Is Frozen
Have you been a victim of identity theft or fraud?
If so, that could be why your recent credit card application was denied.
That’s especially true if you freeze your credit report to block identity theft criminals.
While your personal information will undoubtedly be kept safe, frozen credit reports will also prevent lenders from reviewing and approving your credit applications.
Be sure to unfreeze your reports so you can access the credit products you need.
If you’re a victim of credit card fraud, here are some powerful tips to help you avoid them, and some actionable steps that you can take if you’ve been a victim.
10. You Have a Recent Bankruptcy
Bankruptcies, like other missed payments, can lead to rejected credit card applications.
After all, bankruptcy indicates that certain debts weren’t honored according to the original terms.
If your bankruptcy is still open, it will be very difficult to get approved for new loan products—especially credit cards.
Fortunately, secured credit cards may be a compelling alternative (though they may require a security deposit and higher interest rates).
Know the Reasons for Rejection
If your credit card application was denied, be sure to identify the exact reason(s) for its rejection. It will likely be at least one of the reasons we covered.
Typically, the bank or credit card company that received your application will mail you an adverse action letter specifying the reasons for the denial.
If you don’t receive this letter, be sure to contact the card issuer directly and formally request a reason for their rejection.
Once you know why you were denied, you’ll be able to move forward with confidence.
At uLink, we’re dedicated to providing you with a host of products and services. If you’re having a hard time acquiring a credit card, the uLinkcard Prepaid Mastercard® can be an excellent alternative.
Click here to get started.