Why Credit Card Applications Get Denied

There are a variety of reasons why a credit card application might get declined, such as a low credit score, too much debt, too little income, too many recent credit inquiries and more. You should be able to easily determine what you need to work on because credit card issuers are required to disclose the reason why they declined a credit card application in the rejection letter.

If you do get rejected for a credit card and you think your current financial situation wasn’t accurately represented on the application, you can ask for reconsideration. You can also take steps to prevent future rejections, like getting a secured card and using it responsibly, paying down debt, raising your income, and fixing credit report errors.

Common Reasons Why Credit Card Applications Get Denied

Your credit score is below the level required by the card.

Staying in your lane is extremely important when it comes to credit card applications. You can’t, for instance, expect to get approved if you apply for a credit card designed for people with excellent credit (a score of 750+) when you have damaged or limited credit. Banks will typically specify their preferred credit score range for each credit card, so make sure to compare those to your credit score, which you can check for free here on WalletHub, before applying.

Many banks also allow you to get pre-approved for a credit card before you submit your application. Checking for pre-approval does not hurt your credit score, and it lets you know whether or not you’re likely to be approved for the card if you choose to apply.

You have too much existing debt.

If you have a high loan balance or a large amount of credit card debt, it will stand out to a card issuer. Having more debt than you have in available credit is a sign to creditors that giving you a credit line may be a risk to them, because you may not be able to take on another monthly payment. Card issuers want to see that you can responsibly use only a fraction of your available credit (ideally less than 30%).

Your disposable income is too low or your income is unstable.

Credit card companies are required to gauge an applicant’s ability to pay when evaluating whether or not to grant a new line of credit. If you do not have enough disposable income to support a new credit card, either because you have too little income or your income is unstable, then you’re at a high risk of being unable to keep up with a new card’s minimum payments.

In the eyes of a creditor, this could suggest that you may eventually default. Not having enough income could result in you either being approved for a lower credit line than you anticipated or having your application denied entirely. Increasing your income by working extra hours, getting a side gig, or even finding a better job can boost your odds of qualifying for a credit card.

Your credit history is limited.

If you have just started your credit journey, chances are you don’t have a lot of proof of your creditworthiness. This is called a “thin credit file” or “limited credit history,” and it’s a common reason for a card issuer to deny a credit card application. That said, there are lots of credit cards that cater to people with limited credit or even no credit history at all.

You have too many credit cards.

Having too little credit is one thing, but sometimes, having too much credit can be a deal breaker to a card issuer. There is no certain number of credit cards that is considered “too many”. Every credit card company sees this factor differently. However, it could be a reason your application was denied.

A good rule of thumb is that you have too many credit cards when your income isn’t high enough to keep up with payments on all of them, or you find yourself losing track of what you’ve spent and when you need to make payments.

There are too many hard inquiries on your credit report.

Every time you apply for a credit card, there will be a hard credit pull on your report, except in rare cases. To banks, this could mean two things: First, a hard inquiry causes a small drop in your credit score, so banks might find that your score is too low for the credit card you want. Second, too many inquiries could indicate that you have over-applied due to a desperation for credit, which banks may interpret as high-risk behavior indicative of unstable finances.

We recommend only applying for credit once every six months, at the most, in order to give your score time to recover from the temporary drop caused by each hard pull.

You have a recent delinquency.

Having delinquencies on record, even if just one, tarnishes your credit reputation as it signifies to the issuers that you are financially unreliable and/or desperate. Given that banks want responsible customers who will make on-time payments, it is unlikely they will approve you for a credit card if you showcase such neglect for financial responsibility.

If you do miss a payment on your credit card, make sure to get current as quickly as possible. If you pay before you’re 30 days delinquent, your credit card company won’t report you as late to the credit bureaus. You’ll still likely have to pay a late fee, though.

There is an error on your credit report(s).

The information on your major credit reports serves as the basis for your credit card decision, so it is conceivable that inaccurate data led to you being mistakenly declined. This could be the result of fraud or a credit bureau making a mistake, which they are known to do. So, if you were shocked to see your application get denied, you may want to request a free copy of your credit report and check it for inaccuracies. If you find anything out of place, you can then file a dispute with the credit bureau in question.

You can check your TransUnion credit report for free here on WalletHub and get daily updates. You can also get a free weekly copy of all three credit reports, including those from Equifax and Experian, from AnnualCreditReport.com.

There is other negative information on your credit report.

Other negative pieces of information on your credit report – such as lawsuits, charge-offs, collection accounts, bankruptcies or unpaid child support – could explain why you were denied the credit card you wanted.

You are too young.

Individuals below the age of 18 may not apply for their own credit card. If you are underage and apply to be the primary account holder, you will be denied.

Now that we’ve covered the most common reasons for a declined credit card application, let’s examine the steps you can take to rectify the situation. There are a number of actions you can take after a credit card denial that can help your chances of being approved in the future.

How Often Do Credit Card Applications Get Denied?

Credit card applications get rejected around 22% of the time, according to the latest data from the Federal Reserve Bank of New York. In other words, roughly 1 in 5 applications get declined. The rejection rate has ranged from about 10% to more than 26% over the past decade, but it has usually been close to 20%.

However, that stat includes everyone who applied for any credit card, including people who applied for cards that were way out of their credit range. You can have much better odds if you’re well-qualified and you choose wisely. For example, if your credit score far exceeds a certain card’s requirements, you have a high income, and you’ve been pre-approved, you’re going to have a much higher chance of approval than someone else who applies for the same card with a credit score and income well below the threshold.

What to Do After a Declined Credit Card Application

Getting denied for a credit card is always disappointing, but it’s important to think critically about your situation and take the proper steps in response. Below, we’ll walk you through the best strategies.

Don’t be in a rush to apply again.

You got denied for a reason, and applying for the same credit card (or even a different credit card with the same card issuer) too quickly isn’t likely to help your situation. Improving your credit standing can take time.

If you do want to continue applying for credit cards, keep in mind that your credit score will take a hit each time you apply, and too many applications is a red flag of desperation to card issuers. So make sure you hedge your bets on which cards you’re likely to get approved for, and avoid the ones you know you won’t get. You can join WalletHub to get free personalized recommendations for cards you might qualify for.

Apply with a different issuer.

Different issuers use different underwriting criteria, which means applying for a card from a different bank than the one that denied your original application might result in you getting approved for a different offer (assuming the card is suitable for your credit standing).

Submit a reconsideration request or call the reconsideration line.

Though not many people know about this well-kept secret, credit card issuers are required to reconsider your application upon request if you have new or additional information to provide, given that you provide it in a timely manner.

If you feel that you were unfairly or illogically denied a credit card, you should definitely consider this option. You might want to ask for reconsideration if you’ve fixed credit report errors that were holding your score back at the time you applied, or if you’ve received a recent raise at your job. You can typically request reconsideration by phone or in writing, depending on the card issuer.

Request a free copy of your credit report.

It is always a good idea to examine your credit report in order to determine where you stand on the credit score spectrum. Doing so will enable you to spot your areas of strength and improvement which will better enable you to maneuver the credit shopping landscape.

Checking your credit files won’t come at a cost either, as we are all entitled to a free copy of each of our major credit reports on a weekly basis. WalletHub also provides free daily updates to your TransUnion credit report.

Build, improve and fix errors on your credit report.

Given that your credit report is the primary piece of information that banks scrutinize upon evaluating your application, it’s important to ensure that it’s in the best shape possible. This might entail fixing errors, devaluing past mistakes or building out a thin file.

Apply for a lower tier card.

If you do not get approved for a credit card after submitting a couple of applications, you might want to apply for a store credit card, most of which are easier to get than the average consumer credit card.

Or, you can simply place a security deposit on a secured credit card. Secured cards offer nearly guaranteed approval because your deposit serves as your credit line and thereby prevents overspending. The credit card company can keep the deposit as collateral if you default, but will refund it when you close the card with a $0 balance.

Reduce your debt to income ratio.

If you have a large amount of debt, this is what is most likely hindering you from acquiring the card you want. Focus on paying down your debts so banks will stop viewing you as a “high-risk” candidate.

Learning how to budget effectively can make this process a lot easier.

Become an authorized user.

If you are too young to have your own credit card, having a parent add you to their account as an authorized user is a great way to garner spending power for emergency situations as well as learn how to manage a credit card account and lay the foundation for a strong credit history.

Does Getting Denied for a Credit Card Hurt Your Credit Score?

Getting denied for a credit card doesn’t hurt your score directly. Your credit score will likely drop by around 5 points whenever you apply for a credit card due to the hard inquiry during the application process, and that’s true whether you’re approved or denied.

Even though your credit score isn’t penalized more if your credit card application gets rejected, your score might be able to bounce back faster if you get approved because you’ll have a higher overall credit limit and a new account on which you can make timely payments. Both of those things are important factors in determining your credit score.

If you get denied, then you’ve essentially wasted a credit inquiry. Applying for more cards right away can compound your credit score damage and make your score go down further. So it’s best to either wait six months before applying for another card or to apply for a card you’ll have an extremely high chance of approval with, like a secured card.

Tips to Help You Get Approved for Your Next Credit Card

Getting denied for a credit card once does not mean you’ll never be able to qualify. There are a number of tips you can follow in order to increase your chances of approval the next time you submit a credit card application.

Use any credit accounts you already have responsibly.

If you already have credit card or loan accounts, paying on time is the most crucial thing you can do to improve your credit score. And paying your statement balance in full is ideal because it minimizes interest.

For credit cards and other lines of credit specifically, you should also strive to only use less than 30% of your credit limit at a time. That will help boost your score, and it will signal to future potential creditors that you’re not desperate to borrow money.

Improve your credit score.

Using any credit accounts you have responsibly is the cornerstone of improving your credit score, but there are a number of other things you can do as well, including:

• Checking your credit report for errors and disputing
• Not closing credit accounts that you don’t use (they’ll still build credit even if you don’t use them).
• Setting up automatic payments to ensure you’re never late.
• Becoming an authorized user on someone else’s credit account.
• Getting your rent or utility bills reported to the credit bureaus.

Monitor your credit reports.

Checking your credit reports on a regular basis not only allows you to catch and dispute errors, but it also helps you track your progress and see whether you’re using your existing credit responsibly.

WalletHub provides free 24/7 credit monitoring that alerts you to any major changes on your credit report. You can also receive personalized recommendations on how to improve your credit standing.

Pick the right time to apply.

It’s best to wait at least six months in between credit card applications to give your credit score time to recover. You should also avoid applying for a card soon after submitting an application for any other loan or line of credit, such as a student loan, mortgage, home equity line of credit, or car loan.

That works the other way around, too. Don’t apply for a card soon before you plan to apply for another type of credit, especially if it’s something big like a mortgage or an auto loan. The dip in your credit score triggered by the card application could worsen your chances of getting approved for the other product. Plus, your credit score plays a big role in what your interest rates and fees will be if you get approved, so having the best score possible is important for minimizing the cost of borrowing.

Choose the right credit card.

You should only apply for credit cards that you know you have a good chance of getting approved for, either because you’ve checked your credit score and it meets or exceeds the card’s recommendations or because you’ve already gotten pre-approved, which puts your odds of approval at 80%+.

Whether or not you’ll get approved shouldn’t be the only consideration when choosing which card to apply for. You should also consider fees, interest rates, rewards, supplemental benefits, and more. You can use the following guidelines to help narrow down your options:

• If you have limited credit history or bad credit, your focus should be on building credit at the lowest possible cost, so look for a card with no annual fee that’s easy to get.
• If you have a higher credit score and plan to pay on time each month, aim for the card that offers the best rewards value based on your spending habits.
• If you plan to carry a balance, try to get a card that will minimize interest charges.

You can learn more about how to choose a credit card here on WalletHub.

Bottom Line

Getting denied for a credit card can happen for a variety of reasons, but if you treat it as a learning opportunity and a chance to polish up your credit report, you can bounce back stronger than before.

You can join WalletHub to get personalized suggestions for how to improve your credit and free recommendations for credit cards you’re likely to get approved for. That way, your next credit card application will have a far better chance of being approved. You can also check your credit score for free any time, with daily updates.