When it comes to approving a credit card application, issuers have their own credit policies. They set their own requirements and can consider multiple factors, including things like an applicant’s credit.
The importance of credit
Why is credit important when you’re applying for a credit card? Because your credit history and credit scores are indications of how well you’ve managed debt in the past—and how likely you are to pay back your lenders. And the better your credit, the better your chances of approval might be.
Think of it like this: A positive credit history and good credit scores may suggest that you’re good at managing your finances and you use credit responsibly. But low credit scores may give the opposite impression.
So if a credit card application is rejected, your credit could be a factor. And credit can be dragged down by negative information. That could include things like:
- Missed or late payments, including late credit card payments.
- Charge-offs.
- Bankruptcies.
- Foreclosures.
- Too many hard credit inquiries.
- A high credit utilization ratio.
- Lack of credit history.
Keep in mind that lenders can look at more than just an applicant’s credit. For example, lenders may also consider things like an applicant’s employment status, income and debt-to-income ratio. And if the applicant has been a customer, the lender may consider previous experiences with the customer, too.
The Equal Credit Opportunity Act (ECOA)
If your credit application is declined, you have the right to know why.
The Equal Credit Opportunity Act (ECOA) is a landmark civil rights law that protects consumers from credit discrimination on the basis of race, color, religion, national origin, sex, marital status and age, among other things. If a consumer suspects a lender has been discriminatory, they can take action, thanks in part to the ECOA.
