What Can I Do If My Credit Card Application is Denied?

If you’ve ever applied for a credit card and been denied, you’re probably wondering whether you did something wrong. Let’s face it – rejection hurts, even if it wasn’t a personal decision.

Still, it makes little sense to wallow in embarrassment when you could learn from the situation instead. Chances are, your application was denied for good reason. The best (and only) thing you should focus on now is figuring out what that reason is – and working to rectify it.

Here are a few of the most common reasons credit card applications are denied:

  • Insufficient work history or income: If your work history or income aren’t thoroughly documented, you may not qualify for the credit card you want. Further, banks may see a low income and determine it isn’t enough.
  • Bad credit: FICO scores above 720 are considered excellent. Scores between 690 and 719 are considered good, while scores between 630 and 689 are considered average. Having a score below 630 can make it difficult to qualify for an unsecured credit card.
  • Too many hard inquiries or credit cards: If a credit card issuer sees that you have too many credit inquiries or open credit accounts on your credit report, they may see you as a higher risk and deny your application altogether – even if your credit is good or excellent.
  • A high debt-to-income ratio: Even if you pay your bills on time, banks often frown upon huge debt loads relative to one’s income. In other words, even when your score is excellent, you can be denied altogether if you owe too much money.
  • Your credit history isn’t long enough: When you’re first starting out and have very little credit history to speak of, banks are often unsure of the risk you might pose.

Steps You Should Take When Your Credit Card Application is Denied

If you’re curious which of these reasons applies to your situation, the best course of action is getting your free credit report from the only government-approved site, AnnualCreditReport.com. Then spend some time analyzing your report to figure out what your shortfalls might be. You should also receive a letter from the card issuer stating the reasons for denial within 10 to 14 business days. Most of the time, they lay it out clearly for you and tell you exactly why their answer was “no.”

Once you’ve figured out why your credit card application was denied, it’s time to take some steps to get back on the right track. Here are some steps you should consider taking based on the scenarios above:

If your work history or income are insufficient…

When your work history at your current employer is too short, the only course of action is to wait it out. Continue working at your place of employment and this problem will soon solve itself.

Income, on the other hand, is trickier. However, it’s important to note that most credit card applications ask for household income, not personal income, meaning that you can list your spouse or partner’s income on your application as funds that could be used for repayment. Improving your credit score over time may also help you qualify for a credit card with a low limit.

If you have bad credit…

If you have bad credit, the only issue you should focus on is repairing it – not getting more new credit. Some steps you can take to repair your credit include paying all of your bills on time, paying down debt, and paying off any delinquent accounts. Once you complete some of those steps, you may also want to consider applying for a secured credit card that can help you build your credit in a relatively safe credit environment.

If you have too many hard inquiries or open accounts…

If you are denied a new credit card because you have too many hard inquiries or too many open accounts, that is probably a good sign that you don’t need new credit anyway. There are a few steps you can take, however. Since card issuers generally only look at the number of hard inquiries you have during the last 24 months, that part of the issue can generally solve itself if you wait long enough.

You can also close some of your open credit cards if you think you have too many. Just remember, closing an open line of credit has consequences. First, it decreases the overall amount of available credit you have – a move that can potentially increase your utilization rate (how much of your available credit you’ve used up) and negatively impact your credit score. And second, your credit score may go down a few points with each account you close, although the effect is usually temporary.

If you have a high debt-to-income ratio…

If you owe a lot of money, you should really be asking yourself why you are applying for a new line of credit anyway. If you’re already in debt, your priority should really be paying off that debt before you make any other significant financial moves.

Unfortunately, the solution to this problem is one that will take time and a lot of willpower. Pay down your debts… and don’t stop until they’re all gone. Then, and only then, should you consider getting a new credit card.

If your credit history isn’t very long…

It takes time and consistency to build a healthy credit history. You can usually do the most amount of good by putting utilities and small loans in your name whenever possible and paying your bills in full and on time, every time.

If you need a little extra help establishing a credit history, you can also consider signing up for a secured credit card. These cards require a deposit up front but can help you build your credit, and establish responsible credit habits, over time.

Facing a denial might seem like the end of the world, but it could actually be a blessing in disguise. Most of the time, a credit card application denial is a symptom of a bigger problem, whether it’s high levels of debt, credit that has room for improvement, or other risk factors that should be managed.

If you face a denial, it’s probably best to see it as a warning that something you’re doing isn’t working. Your credit score is too important not to.