In the digital era, having a credit card is now common and almost a necessity for shopping and other transactions. When you apply for a credit card, your bank will likely give you a starter credit card application, especially if you have a low credit score or no credit history. Usually, this is a common situation for students and immigrants. This process has its requirements and once you fulfill all of them you are likely to get approved for your starter credit card.
But, this is not always the case, and your credit card application might be denied. There are several reasons why your credit card application got denied. These can be for example due to your low income, your loan/credit card balances being too high, your limited credit history or you have opened too many credit cards.
You need to know the reason why your credit card application was denied; this is usually issued in a mailing from your lender according to the Fair Credit Reporting Act. In this article, we are going to go over what you can do if your credit card application is denied.
What are the Main Reasons Why Your Credit Card Application was Denied?
There are various reasons why a credit card application gets rejected by a lender. There are general reasons or some might vary according to the type of credit card for which you are applying. Let’s review some of the recurring reasons to consider if your credit card application is denied.
Income Too Low vs. Credit Line Requested
Your lenders will seriously consider if your income levels can fulfill a minimum payment on the card, supposing you use maximum credit limit. This is due to a federal law appointed in the CARD Act of 2009 after the recession. It restricts credit card companies to prevent them from issuing credit cards to consumers who don’t have the required income to repay the accumulated debts from the issued cards.
Note that the income required for your credit card application varies according to the company issuing your credit card, and the line you are seeking. You have to do the research about the required income level for the credit card you are applying for in order to avoid rejection due to that fact.
Too Many Credit Cards
There is a limit to the number of credit lines you can hold, and imperatively exceeding the limit automatically results in your credit card application being denied. This is due to the fact that people try to accumulate sign-up bonuses by opening multiple credit cards in a short amount of time, and this process is discouraged.
If you attempt on applying for multiple credit cards, it will reflect on you as credit hungry and irresponsible to cover all the debt payment, hence, your credit card application will typically be declined. Waiting for your current credit cards to grow in age will certainly help you with your credit card applications, and you should refrain from turning to credit cards application when in need of urgent money.
Credit Card Balances Too High
If your debt is too high as a consumer, the bank will automatically deny your credit card application. Your credit usage has to be kept below 30% as a best practice. And, if your debts are accumulating, you have to make sure to start repaying them, and restrain from taking on more debt with more credit cards. The bank will automatically reject your credit card application if your loan consumption habits tend to always exceed the average credit limit.
Limited Credit History
This applies to situations when you want to apply for top-tier credit cards. The lenders want a record of your debt payments, and you have to prove that you can repay and you are responsible for top-tier credit lines. Applicants who have little to no credit experience will be rejected for certain types of credit cards. It is best to opt for starter credit cards if you are new to the credit world, and use them to build your credit history to be eligible for top-tier loans.
Debt Collection or Delinquency
Delinquencies will reflect very poorly on your credit card application as any recent default will be on your report for seven years. Credit card issuers will interpret a recent bankruptcy or delinquency as a sign of your financial struggles, and thus draw conclusions about your inability to pay off any credit line. If you ever face bankruptcy, it is advisable to not apply for any new credit card for a good period of time. Work on your financial status, then resume on applying and owning credit cards.
Does Being Denied a Credit Card Hurt Your Credit Score?
Strictly speaking, the actual act of having your credit card application denied won’t be a cause for your credit score to go down. However, applying will impact your credit score, whether approved or denied. Typically, you should only apply for a new credit card at most once every six months. Having fewer credit lines and utilizing 30% or less of those lines typically helps you maintain a good credit score. If your card application is denied because of some problem with your existing credit profile, however, it can be a good “red flag” to alert you to a problem so that you can address it.
Alternative Ways to Get a Credit Card
With the knowledge of your credit card application being denied, then you might consider other options to get your credit card. These options won’t make you the principal holder of the card, but you will have higher odds of getting approved.
Take On a Co-Signer
This is an option that banks offer where you can have a joint account with someone else, ideally your spouse. If applying for a credit card on your own was not possible, then make sure your co-signer is not likely to face any of the main rejection issues mentioned above. Banks also will tend to not accept any other relationship that is not marital, so this is a better option if you are a married couple.
Become an Authorized User
This is an interesting option if you have someone close to you with a bank account. The bank will give you a credit card with your name and own number when your relative or spouse lets you become an authorized user on their account. They will see all the transactions made using the credit card and they will hold them responsible for paying off the debt by the bank.
How Do You Ensure You’ll Get Approved Next Time?
If you got a rejection from the credit card company, take your time and study why you got rejected. There is no use in trying to re-apply without understanding your current situation. To ensure that you get approved next time, you can go over the reasons for your decline with a professional financial advisor. They are usually available for an appointment at the bank, so you can just do this where you want to apply for your credit card. Make sure to take into consideration every single change they require of you and on the next application be well informed to assemble every requirement.
So, What Should You Do If Your Starter Credit Card Application is Denied?
The decision on your credit card application can be reversed if it turns out to be negative. Once you receive your credit card application rejection, you can call the bank or the credit card company to discuss reassessing your application. Ideally, customer service should explain the reasons why your credit card application was declined. And with good judgment, you can ask for a review if you feel that you are able to provide the required data for your approval.
For example, if the reason was your credit history, you can showcase how you are financially responsible by issuing bill payment records. There is no guarantee that reviewing your application will change the decision, but it will inform you of your rejection, and this will help you better your application later.
Altogether, there are many factors that come into play when dealing with your credit card application. Make sure that you understand the reasons you got declined in order to do something about your application. If you cannot get your own credit card with your account, you can resort to options like co-signing and using someone else’s account as an authorized user.