So Your Credit Card Application Was Rejected — What Now?Published on September 6, 2019 by CreditFresh
There are more reasons than bad credit stopping you from getting a credit card. Find out what they are to figure out how you can move on from your rejection.
It’s hard to avoid ads or promotions for the latest, greatest credit card. They’re on TV, billboards, and mobile ads.
You might mistake these campaigns as a sign that banks and other lenders are desperate to sign anyone up for a card. Except, they’re not.
Being rejected may come as a surprise, but there was never any guarantee you’d be approved. In fact, according to the Federal Reserve Bank of New York, rejection rates for credit card applications rose from 2017 to 2018.
But why was your application denied, specifically? Below are some common reasons why credit card companies reject applications.
Reasons Why You Were Rejected for a Credit Card
It’s hard not to take your rejection personally. But it’s not a reflection of who you are as a person. It simply means you haven’t met a lender’s specific application requirements.
These requirements vary from one lender to the next, so there are a lot of potential reasons why you might get denied, including:
1. You’re too young
Age is nothing but a number, unless you ask a credit card company. Then it’s an important detail that may make or break your application.
Most of the biggest companies won’t issue credit cards to anyone under the age of 18. There are some exceptions, but these cards are usually tied to a parent or guardian.
Generally, you’ll find it challenging to get any kind of credit on your own, including lines of credit or installment loans, until you’re of the age of majority or legal age to contract— which is 18 in most states.
2. You have thin credit
A credit card company may deny your application if you’re just starting to establish credit.
When it comes to credit, many lenders want to see a thick file packed with examples of how you’ve used financial products such as credit cards, installment loans, and personal lines of credit in the past.
Many lenders and credit card companies look at this data to predict how you’ll use their credit card if you were approved.
If there isn’t enough information to indicate what type of borrower you’re likely to be, they may deny you.
3. You have bad credit
Subprime credit may be a major roadblock when it comes to getting some credit, so it’s often the reason why people are rejected for credit cards and personal loans.
Your credit report will show most negative information for seven years – or ten years for certain types of bankruptcy – as recorded by the major credit agencies, which include Experian, Equifax, and TransUnion. However, if no new negative information hits your credit file, you may stop feeling the effects of bankruptcy on your credit report after five years.
Your credit score is a three-digit number that represents your financial history and estimated risk as a borrower.
Most companies follow the FICO scoring range, which spans 300 to 850. According to this model, prime credit is any score over 670, while subprime credit is usually a score from 670 and below. For more details on how FICO organizes credit scores, click here.
Many banks and credit card companies want to see at least a fair credit score and a report that shows few, if any, delinquencies.
So, you may have been rejected for a credit card if your report shows:
- Delinquencies: If your report shows frequent late payments for current accounts, it suggests you may not be able to meet your financial obligations and your credit score may be affected.
- A collection record: If you fail to pay off your bills for several months, a lender may send your account to collections. A collections or public record (which includes bankruptcies) will be a dark mark against your credit for roughly seven years.
- A charge-off: This happens when you haven’t paid your bills for so long, your lender has given up on collecting what you owe them. A charge-off is a serious entry in your report and will lower your score significantly.
4. You have too much debt
Another reason why you may be rejected for a credit card is your debt load.
Credit card companies want to see you have enough expendable cash to cover your financial obligations — including the new credit card.
High balances on revolving credit and large outstanding loan principals suggest that a lot of your money is tied up in other debt payments. Depending on how high these balances are, and how many loans you have, it may suggest your finances are tight. Adding anything new to the mix could tip the scales and make it difficult for you to keep up with financial obligations.
5. Your income is too low
The paycheck you take home usually plays a role in your application. Like your debt load, your income indicates how well you would be able to take on the added responsibility of a credit card.
Earn too little, and a credit card company may reject you. Many credit card companies require their customers to have a minimum annual income to ensure the account is an affordable addition to their budget.
6. You’ve applied for credit too often
Some lenders and credit card companies often apply what’s called a hard check on your credit to appraise your borrowing abilities when you apply for a credit card or loan. Any time your credit undergoes a hard check, it leaves behind evidence on your report. It may even lower your score.
7. You’ve made an error
A slip of the finger while you’re filling out your application may have an impact on your success. Every lender wants to see accurate personal and financial information. Otherwise, they won’t be able to assess your creditworthiness.
Make sure you haven’t made any spelling errors or typos and double check that any information regarding your income is up to date.
Is it Bad to Get Rejected for a Credit Card?
Once you get over the shock of your initial rejection, you probably have some questions — namely, is it bad to get rejected for a credit card?
Your gut reaction may be yes. After all, you aren’t getting what you asked for. If you needed the credit card to help take on a major purchase, repair, or unexpected expense, your rejection leaves you in the lurch.
But does your rejection have a greater impact on your finances? It depends!
Does Getting Rejected for a Credit Card Affect Your Credit Score?
Now this question — does getting rejected for a credit card affect your credit score — gets closer to the point.
The answer is no. Your rejection won’t affect your score. Any outcome of a loan or credit card won’t impact your credit score — whether you’re approved or rejected.
However, you still might see your score dip after you apply.
Recall that many credit card companies perform a hard check on your credit report when reviewing your application. A hard check or inquiry typically stays on your report for two years, during which time it may affect your score.
A hard inquiry here or there likely won’t have a major impact on your score. But it may damage your score if you apply for several accounts over a short period of time.
Should You Try Again?
If at first you don’t succeed, should you try again? It depends on the reason why you were rejected for a credit card.
If you’re 17 going on 18 and about to start college, you may have better luck if you apply again after your upcoming birthday with proof of enrolment for a card with a minimum age requirement of 18.
If your report shows a minor delinquency from a few years ago, you may be able to get your application reconsidered if your current payment history is in good standing.
However, if you have subprime credit or your report shows accounts currently in collections, you may not be able to change the outcome of a rejection.
What if You’re Rejected for a Credit Card in an Emergency?
Being rejected for a card you only wanted because of the promised travel points isn’t ideal. It may be inconvenient or disappointing, but ultimately, it likely won’t have a major impact on your immediate finances.
But what if you planned on using the card to help cover an essential car repair or unexpected speeding ticket you can’t afford right away?
You may have better luck with other credit options.
How Does an Online Personal Line of Credit Work?
In many ways, an online personal line of credit works the same as a credit card. With an online personal line of credit, you can:
- draw from your credit limit at any time
- redraw additional advances up to your available limit once you pay off what you’ve used
As financial products go, they aren’t carbon copies, even though they may share some similarities. Lines of credit and credit cards play distinct roles in your financial toolbox, and it’s important to know the difference before you apply for either of them.
The plastic in your wallet fills a few needs. It helps you make big purchases or cover emergency repairs. You may also use it to cover everyday expenses, like paying for dry cleaning or ordering food online.
An online personal line of credit, on the other hand, is meant to act as a financial safety net when money is tight. It should be used for unexpected emergency expenses you can’t delay or ignore — not daily or recurring monthly expenses.
How to Build Credit History Without a Credit Card
Have you ever heard that you can’t build your credit history without a credit card? Well, this is simply not true. You may have a chance to build credit history if you borrow money online from certain financial institutions.
If you’re approved for a line of credit and your payment activity is reported to one of the major credit bureaus, you may be able to impact your credit score by keeping a low balance and making your payments on time. But be careful that you’re making these payments on time, since missed payments may also be reported and may negatively impact your credit score.
Any financial institution that reports your payment history to one of the major credit agencies may influence your credit the same way.
That’s why it’s important to pay all your bills on time — not just your online personal line of credit.
How Long Does it Take to Establish Credit?
There’s no simple answer to this question. It simply takes time to build your credit history.
Building a positive credit history also relies on many financial habits that help lay down positive instances of credit on your report — like paying your bills on time, every time. Remember that your credit score is a dynamic number affected by many different factors. This means that making payments on time on your personal line of credit won’t have a positive impact on your credit score if you’re defaulting on other loans. It’s important to make consistent payments on time on all your bills and loans.