Enticing credit card offers are everywhere – from closed store cards that offer a whole range of rewards to reward the most elite credit cards in the world. But just because you want to add a particular credit card to your wallet doesn’t mean you can: First, you need to apply. This is true even if you receive a credit card pre-approval offer. In this case, the credit card company only thinks you qualify and you still need to apply.
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Once you apply for a credit card, you must be approved and, depending on several factors, you may not. If you’ve recently applied for a credit card that you didn’t get or if you’re considering applying but aren’t sure if you’ll be approved, here are some reasons why a credit card application may be declined and what to do if it happens to you.
You don’t have enough income
“Most credit card issuers have a minimum income requirement for their credit cards, although it varies by issuer,” said Mike Pearson, credit expert and founder of the personal finance site credit start. “If you have no income, or you… not making enough money for a particular credit card, your application could be denied. Here’s the even trickier part: card issuers generally don’t publish one minimum income requirements for their credit cards on their websites, so it can be difficult to know what income you need. A tip is to search on Reddit and other personal financial forums for the card you are interested in see if other users are discussing the income they needed to get to get approved for the map. This gives you general guidelines for what income you need to be approved for your card.”
You have a limited credit history
“A common reason why people’s first credit application is often declined is because they have a limited credit history,” said Scott Nelson of MoneyNerd. “It is difficult for a creditor to Assess how likely you are to repay credit if you have no history. Repair this, before applying for a large loan, take out a credit card.”
If you’re interested in more tips on building your credit history, here’s: 30 things you need to know.
Your credit card balances are too high
“High credit utilization, that is the amount of revolving debt you use divided by the amount of debt available is a common reason credit card applications are declined,” said RJ Weiss, CFP and founder of The Ways to Wealth. “To improve your credit utilization ratio, your options are to pay off existing ones debt or increase the amount of debt you can borrow. The the latter can be done more easily by contacting your existing credit card company and asks for a rate increase. A good rule of thumb is keep your credit utilization rate below 30%.”
You have bankruptcy or other negative points on your credit report
“Bankruptcy stays on your credit report for seven to 10 years, and is definitely a red flag to” credit card companies,” said Jenna Vasquez, senior finance editor at Best Company. “Especially if you have recently been declared bankrupt, credit card companies are likely to refuse you a credit card, since your recent financial history is a bit rocky. The best thing to do in this situation is to patiently start building your credit again. Pretend you pressed the reset button, and if some time has passed since you were declared bankrupt, please contact your bank about getting a starter credit card with a very low credit limit. you won’t see changes in your credit score overnight, but in the world of credit, time is your friend, and you will get back on your feet financially and build your credit little by little.”
Other negative information about your credit report, such as payments that are 30 days or more late or charges (when your payments are not made for six months in a row), can paint a poor picture of you as a credit user and hurt your credit score and cause your application is rejected. Unfortunately, delinquent payments and charges can remain on your credit report for seven years. The good news is that their impact can diminish over time. While you wait for them to drop out, practice good credit habits, such as always paying your credit and loan payments on time to demonstrate responsible use of credit.
Your credit report contains too many difficult questions
“If a bank sees that you’ve applied for a lot of other credit cards or had too many questions, that’s a sign that you’re trying to get credit — and fast,” said Alex Miller, founder and CEO of Upgraded Points. “People in this category tend to abuse that credit and don’t handle it well, and the bank is likely to refuse a credit card. The solution to this is to wait with applying for the next credit card; allow several months to pass before applying.”
Your credit report contains errors
A credit card refusal can happen through no fault of your own, such as errors in your credit report. Common errors include unacknowledged bills, unacknowledged debts reported to collections, or a payment incorrectly reported as late or missed. You can get your free TransUnion credit score and $1 credit report from GOFreeCredit.com. If you find an error, here’s advice on how to fix it:
“Contact both the credit bureau and the organization that provided the information to the bureau,” said John Corraro, financial planner for Barnum Financial Group. “Both are responsible for correcting inaccurate or incomplete information in your report. Let them know what information you think is incorrect. Credit bureaus must examine the item(s) – usually within 30 days. Include copies of documents that support your position.”
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Last updated: June 23, 2021
This article originally appeared on GOBankingRates.com: What happens if you’re declined for a credit card – and what to do next?
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