By Olivia Roos
August 12, 2022
In this weekly column, we answer readers’ pressing financial questions. No question, big or small, is off limits. Ask away by emailing us at contact@themoneymanual.com. This week, we attempt to tackle why some people might get denied for a credit card.Question: I’m a recent college graduate and I’m working in the tech industry in San Francisco, CA. I want to get a credit card so I can start benefiting from all the rewards that having a credit card offers. But every timeI apply for one, I get rejected. My job pays well and I’ve only been late on paying back my student loans once, so I don’t understand what’s the problem. Got any advice? Thanks, Craving Credit in SF.The Money Manual Answer: Hey Craving Credit in SF! I know exactly where you are coming from: It took me ages to get myself a good credit card that rewarded me with miles and cashback. The first thing you need to do to understand why you are having trouble qualifying for a rewards credit card like the ones offered by American Express or Mastercard is to check your credit score. The best way to do that is through Credit Sesame which will send you your credit score completely for free.
Why Your Credit Score Matters
Your credit score is the number one factor that determines if you will qualify for your credit card of choice. While I have no doubt that you are a trustworthy and responsible person, your credit score works differently than a judge of character. A credit score is made up of five different things:
- 35% Payment history
- 30% The amount of debt you have compared to your available credit
- 15% The age of your accounts
- 10% The number of new applications for credit
- 10% Your mix of credit items from student loans, personal loans, credit cards, auto loans, etc.
Given what you have told me, your payment history and the age of your accounts are probably the largest factors causing your credit card rejections. Even if you were late in paying back your student loans just once, when you don’t have much of a credit history, that one late payment leaves a big impact on your credit score.A good option to keep on track of your credit score is tosign up for free credit monitoring. While most companies will charge a high fee to frequently send you your credit report, Credit Sesame grades and sends your score completely for free. You can evensee if there are any negative marks on your credit report.
How To Boost Your Credit Score
People without much of a credit history should apply for a basic secured credit card. Secured credit cards require a cash deposit, have relatively high fees, low credit limits, and don’t offer many–if any–rewards. But thankfully, after six to twelve months of responsibly using the secured card, you will have enough credit history to apply for a more rewarding, unsecured card. And Credit Sesame is there for the entire journey, from advising you on your first secured credit card to evaluating the best options for the next cards you apply for.Besides getting a secured credit card, there are many other things you can to do to improve your credit score. You should keep your balance low on your secured card, make all of your payments on time, and try and diversify your credit portfolio. If you are renting an apartment in San Francisco, then paying your rent and utility bill on time are two other forms of credit that will help.Another way to improve your credit score and also boost your savings is to sign up for Self Lender, a credit building service that helps its members improve their credit score and increase their savings. Rather than jump through the hoops of getting a secured card, Self Lender gives you an FDIC insured CD savings account to make monthly payments into.By making consistent payments into your CD account you are able to build up a strong credit history, which is one of the most important factors in having a good credit score. By the end of your CD account (either 12 or 24 months) you will have a guaranteed increase in your credit score.
Final Thoughts
Everyone can have a good credit score, it doesn’t matter how much money you make. And if you are really interested in boosting your credit score, we would recommend you sign up for Credit Sesame. It won’t cost you a dime and the company has a strong track record of improving its clients’ credit scores.Hope this helped and if you have any other questions, please don’t hesitate to reach out to us at contact@themoneymanual.com and we will do our best to tackle your question, or find an expert than can find you an answer.Image: Pixabay
FAQs
You should also request a copy of your credit report to ensure all information is accurate. If you were denied due to a low credit score, spend time improving your credit to make you a better candidate next time around. If you see incorrect information on your credit report, you can dispute it with the credit bureau.
What should you do if you are decline a credit card? ›
What to Do When You Get Denied for a Credit Card
- Ask the card issuer to reconsider. ...
- Understand your credit reports. ...
- Pay down credit card balances. ...
- Pay off other debt. ...
- Wait to apply again. ...
- Apply for a more suitable card. ...
- Get added as an authorized user. ...
- Dispute inaccurate credit information.
What things should you do if you are denied credit? ›
If you were denied because of incorrect information in your credit report, get your credit report and dispute the errors that are in it. If you were denied because you have too many credit cards or too much outstanding debt, you can reapply after paying down your balances or closing some accounts.
Why do I keep getting denied for credit cards with no credit history? ›
If you are always declined in credit card applications, it's likely because you're applying for the wrong cards or have submitted too many applications in a short time. Factors like limited income, debt from loans, unpaid bills, or limited credit history could also prevent you from qualifying for certain cards.
Can I challenge a credit card denial? ›
The reconsideration process includes a manual review of your credit report by an analyst with the bank or card issuer. This is your opportunity to answer some questions and see if you can turn that denial into an approval. Sometimes it's as simple as reallocating credit lines or submitting identity verification.
How to get approved for a credit card after being denied? ›
What to do after your application is declined
- Determine why your application was denied. ...
- Request a copy of your credit report. ...
- Ask for a reconsideration. ...
- Find a more suitable card. ...
- Work on paying off debt. ...
- Use your current credit cards carefully. ...
- List all income when applying. ...
- Look for cards that match your credit profile.
Does it hurt your credit when your card is declined? ›
A denial or approval won't hurt your credit scores, because decisions aren't reflected in credit reports.
How much will my credit score drop if I get denied a credit card? ›
Being denied for a credit card doesn't hurt your credit score.
Is it illegal to get denied credit? ›
What is credit discrimination? The Equal Credit Opportunity Act makes it illegal for a creditor to discriminate in any aspect of credit transaction based on certain characteristics.
Why do I keep getting denied when I have good credit? ›
You may also have a history of high credit utilization. If you consistently max out your credit cards, for example, issuers may be hesitant to offer you new credit even if you always make your payments on time. Or maybe you've applied for too much new credit within a short time period.
No, a credit card denial does not affect your credit. However, you might see a slight drop in your credit score due to the hard credit inquiry associated with your credit card application.
Why won't Capital One approve me? ›
Some common reasons for not getting approved for a credit card include: Having a low credit score. Having too much debt. Having too many hard inquiries on your credit reports.
What credit card companies don t want you to know? ›
6 Things Credit Card Companies Don't Want You to Know
- 1) Your “fixed rate” isn't set in stone. “Fixed rate” sounds deceptively solid. ...
- 2) The “45 day notice” is misleading. ...
- 3)They profit from your loss. ...
- 4) They're (sometimes) willing to negotiate. ...
- 5) They like to sneak in fees. ...
- 6) They charge merchant processing fees.
What will the credit company do if you are denied? ›
Under the Equal Credit Opportunity Act, creditors have 60 days to provide you with a specific reason as to why you were denied a line of credit. This is known as an adverse action letter. You may be rejected for a variety of factors, such as having a low income, a short credit history or too much credit card debt.
What is the first step to follow if you are denied credit? ›
First, find out what caused the lender to turn you down. If a lender rejects your application, it's required under the Equal Credit Opportunity Act (ECOA) to tell you the specific reasons your application was rejected or tell you that you have the right to learn the reasons if you ask within 60 days.
How long should I wait to apply for another credit card after being denied? ›
As a general rule of thumb, consider waiting around three to six months before reapplying. In the meantime, try to improve your creditworthiness, which might increase your chances of getting approved when you reapply.
What happens when I get rejected for a credit card? ›
No, a credit card denial does not affect your credit. However, you might see a slight drop in your credit score due to the hard credit inquiry associated with your credit card application.
Is it bad to decline a credit card offer? ›
And canceling it might be a good idea if using the card could lead to credit card debt. But keep in mind that doing so could negatively affect your credit scores. For example, canceling the card will decrease your available credit and increase your credit utilization ratio.
Does a decline affect your credit score? ›
When a lender accesses your credit report, a so-called hard inquiry is added to your reports. If your loan application is denied, the inquiry will remain, but the lender's decision will not appear on your credit reports. So, a declined loan will not appear on your credit report and won't directly impact your scores.
What happens if you don't accept a credit card? ›
The only way to back out is to cancel the card, which can hurt your credit score. Think before you apply.