What to Do When Your Application for a Credit Card is Denied

What to Do When Your Application for a Credit Card is Denied

by | Feb 1, 2021

Just because your credit card application has been denied doesn’t mean you’ll never get a new credit card. There are certain lessons you can learn from an application denial. Also, there are steps you can take to help the chances of your future applications getting a thumbs up. Here’s what to do when your credit card application is denied.

Read the Adverse Action Letter

Adverse action letters are documents that creditors provide to applicants when an application for credit is denied. The letter can explain the reason why your application was rejected. Common reasons for a credit card application denial can include:

  • High credit utilization ratio: If you already have a lot of your available credit tied up in debt (for example, other credit cards with high balances), the credit card issuer may think you’re overextended and a risky customer.
  • Too many recent credit applications: If you have a lot of recent credit applications on your credit report for credit of all types, including mortgages, car loans, personal loans, credit cards, etc., it can indicate you’re having financial issues and might be desperate for credit.
  • Lack of credit history: When you have a limited or nonexistent credit history, such as if you’re a recent immigrant or just turned 18, this can be an obstacle to getting approved. There simply isn’t enough data about you for creditors to make an informed decision. If this is the case, consider a starter credit card, student credit card, secured credit card or getting added as an authorized user to another person’s card.
  • Negative items on your credit report: Negative items such as late payments, accounts in collections, bankruptcies, foreclosures and more can damage your credit.

Ask the Card Issuer to Reconsider or Look for Another Card

Once you’ve read your adverse action letter, you can call the credit card issuer and ask them to reconsider your application if you have new information you didn’t originally disclose. For example, you may have additional income such as a side hustle, retirement savings or child support that you didn’t include on your original application.

If you have no extra information for the card issuer to reconsider, it might be time to start looking for a card with looser credit requirements. If your credit is nonexistent or in poor shape, consider a secured credit card to get started. Remember that multiple applications for the same type of credit in a short period of time can be combined into a single hard inquiry on your credit report with most credit scoring models.

Check Your Credit

But before you submit any more applications, you should know the full story of your credit. Pull your credit reports to find any problems that could be holding you back. Read through your credit reports and pay close attention to late payments, accounts in collections, bankruptcies and other negative items.

If you find inaccurate information in your report, you may need to contact the credit bureaus to take action. Inaccurate information on your credit report also can be one of the signs of fraud.

Work on Your Credit Health

Need to work on your credit health before your next credit application? Here are some tips:

  • Make all payments on time and in full.
  • Maintain low balances on any credit cards you already have.
  • Monitor your credit to watch your progress, protect yourself from identity theft and receive instant alerts when changes land on your credit report.

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