Rejected For a Card? Understanding a Credit Card Denial Letter and Your Options
Did you receive a credit card denial letter in the mail after submitting an application? There are many possible reasons for rejection, ranging from low income to limited credit history. Here’s a look at the reasons your application may have been denied, possible remedies and how you can avoid denial on your next credit card application. There are 12 main reasons your credit card application was denied, which should be stated in your adverse action letter, or denial letter, sent out within 10 days of your application.
The 12 Reasons For a Credit Card Denial
Application not completed: If your application is missing important information you will probably be denied. If you applied online this isn’t very likely, as most online applications won’t let you submit an incomplete application. You’re too young: Your application will probably be denied if you are under 18, unless you’re being added as an authorized user to a parent’s account. You may also be denied if you’re under 21 and have insufficient income or a co-signer. Low income: Credit card issuers each have their own income limits and you may be denied if you don’t make enough money for the credit card of your choice. Unstable work history: If you haven’t been at your current job for awhile you may be denied, as credit card issuers are hesitant to issue credit cards to those who have periods of unemployment or unreliable income. Limited credit history: This is a common reason for denial. If you don’t have a credit account on your file that has been active within the last 6 months FICO will be unable to generate a credit score for you. This makes it unlikely to get approved for a credit card at all. Recent collection or public record: This is also a common reason for denial. When negative items like collections and public records first appear on your credit report they hurt the most and their impact slowly lessens over time. These delinquencies are a red flag to credit card issuers that you don’t have enough money to meet obligations Charge-off on your report: A charge-off is one of the worst things a credit card issuer can see on your report and shows that you have failed to pay another credit card in the past. You can pay this balance to improve your chances in the future. Last delinquency was too recent: If you have a delinquency on your credit report during the last 6 months it can be very difficult to get approved for a credit card. Like collections and other negative items, the impact of a delinquent payment will lessen over time. Too many credit inquiries: If you’ve applied for many credit cards or loans during a short period of time you will most likely have your application denied, as credit card issuers view this as a sign of financial trouble. Too many open credit card accounts: Credit card issuers have their own internal limit for open credit cards they’ll accept and you may have your application denied if you already have too many credit cards. Loan balances are too high: Paying down existing loans can improve your chances for an approved application. Credit card balances are too high: If you’re using too much of your available credit or have maxed out credit cards your chances for denial are fairly high.
What You Can Do After A Credit Card Rejection
For the most part you have very limited options after receiving a denial letter. You do have the right to know exactly why your application was denied, so you may request a free copy of your credit report after any rejection. If you notice any errors it’s important to contact every credit card bureau and go through the necessary steps to have these errors fixed. This can greatly increase your chances for success the next time you apply for a credit card. It definitely won’t help to keep applying for more credit cards after a rejection, as this increases your chances for denial and harms your credit score even further. You may want to instead try applying for a store credit card, which are rather easy to qualify for, or a secured credit card to improve your credit score overall. You also have the option of applying for reconsideration if you feel you have a good credit score and a history of on-time payments.
It’s very important to understand that your credit card application was denied by a computer, not a person, which calculated your credit score and determined your overall risk. If this risk was too high, you received a denial letter in the mail. Still, there is some hope for reconsideration if you speak to the right department. Credit card reconsideration can work if you have a good credit score and speak to the department in charge of new applications. Begin by asking why you were denied, speaking in a polite and casual manner. Next, plead your case by offering them new information that the computer did not use to deny your application. Let the bank know you have a good credit score and great payment history and inform them of your accounts in good standing. You should also explain why you want the credit card, avoiding reasons like, “It has the best sign-up bonus.” Instead, explain that you want to try the card’s unique features like extended warranty coverage. It’s also a good idea to offer remedies to alleviate the bank’s concerns. If, for example, you were denied for having too much available credit, offer to close an account with the bank you aren’t using and have the credit transferred to this new credit card. While it won’t always work, many people have found success using this method.
Credit Shout is a community of personal finance experts dedicated to helping you save money and make smart financial decisions. Learn how to master your credit card rewards, improve your credit score and start eliminating your debt.