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When you apply for credit cards and get denied again and again, you may want to know what's going on. The first thing you need to know is that it may not be the final word. And the second thing is that there are a few steps you can take to finally get approved.
One thing you can do right away when your application was denied is to call the card issuer's reconsideration line. Many issuers have automatic systems to review online applications, which means a minor mistake (for example, a typo in the address) may result in a denied application. When you call the issuer directly, you can ask a representative (a real human) to review your application in more detail or you can explain some things or provide more details.
If calling the issuer doesn't help, wait for an adverse action letter from the issuer to learn the reason why your application was rejected, and then act accordingly.
The most common reasons the issuer may deny your application are:
- Low credit score: each credit card requires a minimum credit score range, therefore it's a good idea to check your credit score before you apply for any credit to know whether you need to consider cards recommended for good credit, fair credit or bad credit.
- Low income: income is a major factor in credit approval decision as your application can be rejected when your income is too low or you do not have your own income. As a rule, you can include in your total income amount any verifiable income you have, like wages from your job, spouse's income, or investments.
- Negative credit history: issuers do not like to see recent credit payments, collections, foreclosures or bankruptcies on credit reports.
- High balances: if you are carrying high balances on your active credit cards, you may be denied a new credit card. Issuers look at your credit utilization ratio (total outstanding debt compared with your total available credit) when they review your application. It is recommended to have this ratio below 30%.
- Too much new credit/inquiries: when you apply for a lot of new credit at once, you might be considered a credit risk. Plus, hard inquiries may lower your credit score. It may be wise waiting tree to six months before applying for a new card.
- Application restrictions: many credit card issuers have application restriction to prevent credit card misuse. For example, some issuers may allow you to have only one consumer credit card from them, others may limit the number of applications you can submit with them during a specific period, Chase has their 5/24 rule, and Bank of America has 2/3/4 rule.
If you take care of the things above before you apply for your next credit card, meaning use your current credit cards responsibly, build your credit score, monitor your credit reports, and choose the right credit card for you, you may increase your chances of being approved.
