Let’s face it: Finding a credit card that meets your needs can be challenging. If your application gets rejected, it’s natural to feel a little miffed — especially when you’re not sure why you were denied.
Here are five common reasons credit card applications get turned down, and what you can do about it.
1. Your credit score is too low.
The first thing to do is to call up the issuer, and ask why your application was denied. Under the Equal Credit Opportunity Act, a lender must give you the specific reason for rejecting your loan or credit application. You must ask within 60 days of being notified. One of the most common responses is that a would-be cardholder’s credit score is too low.
Of all the information about you that card issuers evaluate, your credit score is the most important. This three-digit number, which ranges from 300 (worst) to 850 (best), represents how responsible you’ve been with borrowed money in the past. The higher your score, the more creditworthy you are.
If your credit score isn’t up to snuff, taking steps to improve it is your best option. These include:
— Paying your bills on time.
— Keeping the balances on your other cards below 30 percent of their credit limits.
— Limiting applications for new credit (especially credit cards).
After following these new habits for six to 12 months, your score will likely improve. This is a good time to consider reapplying for the card you couldn’t get before.
Note: If your credit score is low and the reason is a mystery, it’s a smart idea to review your credit reports for errors. You can access your credit report from the three credit bureaus (TransUnion, Experian and Equifax) for free each year at AnnualCreditReport.com. If you discover that a mistake on one or all of the reports is dragging your score down, you can dispute it and have it corrected.
2. Your income is too low.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (known as the CARD Act) requires issuers to consider a customer’s ability to pay before handing over the plastic. This means that if you have a low income, you may not qualify for a credit card.
Banks interpret this rule differently; there’s no industry standard for what constitutes a “high enough” income. Consequently, while one issuer might reject an application for inadequate pay, another might find the same amount acceptable and grant you a card.
When calculating your income, don’t forget sources besides your regular paycheck. Remember, overtime pay at your job and the money you’re making from a side business both count. Be sure to factor those into your application the next time around.
3. You applied for the same card recently.
Although many issuers allow you to apply for the same credit card more than once, most require a waiting period before you go try again — typically 30 to 90 days.
Unfortunately, the only thing you can do in this case is wait until you’re eligible to reapply.
4. You’re unemployed.
Being between jobs makes it more difficult to get approved for new plastic, but it’s not impossible. This goes back to the income issue: Without a clear way to make your payments, banks might be leery of extending credit. However, if your spouse is employed, using his or her income on your application is permitted.
A 2013 amendment to the CARD Act allows non-working spouses to cite a partner’s income on credit card applications as long as they have “reasonable access” to the funds. This is something to consider before reporting $0 as your current income on a credit card application.
5. You’ve never had a credit card before.
Lack of a credit history might not seem like much of a reason for rejecting your application. But if you’ve never had a card before, getting credit is challenging. A blank credit profile makes lenders nervous because they aren’t sure how you’ll handle borrowed money.
You have a few options. You could try to recruit a loved one with good credit to serve as a cosigner. Cosigners essentially backstop your credit card play; if for some reason you miss your payments, the cosigner is responsible for making good on the debt. This puts many issuers at ease, because they know that someone with a good credit history is on the hook for paying the bill if you don’t.
Another idea is to get started with a secured credit card. This will require you to put down a deposit, which, as the name implies, guarantees the bill is paid. But otherwise, secured credit cards function exactly like their unsecured counterparts. By using this card consistently and responsibly, you’ll build a solid credit history. In fact, you should be able to upgrade to a regular card within a year or so.
Getting rejected for a credit card isn’t the end of the world — if you use the tips above, you should be able to qualify soon.
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5 Reasons Your Credit Card Application Got Rejected originally appeared on usnews.com
