Thinking back to when I applied for my first credit card, the entire process was pretty straightforward and simple. Despite being a full-time college student with little income and zero credit history, I was approved with no problem. Then again, this was the late 90s and during a time when banks would give broke students a credit card like it was candy. It’s not like this today.
Applying for a credit card can build your credit history. But with tougher credit and income requirements, instead of receiving a credit card in the mail a couple weeks after submitting an application, you might get a rejection letter. Your first reaction might be anger, and you might say the credit card gods are against you. But there’s a reason for the bank’s decision. To position yourself for an approval, you have to know why you were rejected in the first place.
Your Credit Card Balances are Out of Control
There are no rules regarding how many credit cards are too much. So if you already have a handful of credit cards in your name, it’s possible to get approved for a new card as long as you’re managing your existing accounts responsibly. Some banks, however, might reject your application for a credit card if your current card credits are maxed out or close to being maxed out.
You might shrug off high balances, but it is a big deal to banks. This is because maxed out credit accounts increase the probability of defaulting, and banks don’t want to risk losing money. Before applying for a credit card, work on paying down the balances you already have. Ideally, you should keep credit card balances below 30% of your credit line.
You Got a Little Happy with Credit Applications
Credit card companies also look at your number of recent credit inquiries when deciding if you qualify for an account. An inquiry appears on your credit file every time you submit a new application for credit and banks pull your credit history.
When establishing credit, some people make the mistake of applying for as many accounts as possible to increase their odds of an approval. What they don’t realize is that each credit inquiry lowers their credit score by a few points, making even harder to qualify for a credit card. An excessive amount of inquiries is also damaging because some banks are hesitant to extend credit to applicants who have multiple inquiries within a short span of time. The bank may assume you’re desperate for credit or experiencing some sort of financial trouble.Denied a Credit Card? 5 Reasons Why Your Application Was RejectedClick To Tweet
You Have Fresh Delinquencies on Your Credit Report
Negative information can stay on your credit report for up to seven years and have an immediate negative impact on your credit score. The good news is that these items aren’t as damaging to your credit as time goes on. So if you have a 60-day late payment on your credit report from four years ago, most banks will overlook this item. They’re more interested in your recent credit history and how well you’re managing credit today. With that said, a bank might reject your credit card application if late payments, collection accounts, charge-offs or judgments have been added to your credit report within the past 12 to 24 months.
It’s Your First Crack at Establishing Credit
Sometimes, no credit is just as bad as having poor credit. When you apply for a credit card with a blank credit history, banks are unable to gauge how well you manage debt. And unfortunately, this can result in a few rejections. The trick to overcoming this hurdle is applying for credit cards created specifically for individuals looking to establish credit. These include secured credit cards, as well as unsecured credit cards. Unsecured credit cards don’t require a security deposit, but they typically have higher interest rates and lower credit limits.
You’re Under 21
Just because you’re a legal adult at 18 doesn’t mean you can get a credit card. If truth be told, getting approved for a credit card is challenging for anyone under 21. This is because the Credit Card Act of 2009 requires applicants under 21 to have a cosigner, such as a parent, a guardian or another adult over the age of 21. The only exception is when an individual under 21 can provide sufficient proof of independent income and assets to manage minimum monthly payments.
Because most working adults have at least one credit card, some people think credit cards are accessible to everyone—which unfortunately, isn’t true. Credit card companies want customers just as much as consumers want credit accounts. Even so, banks are in business to make money, not lose money. And if you don’t fit their criteria of the ideal applicant, you won’t get an account. To move the odds in your favor, do your research and make sure you know what banks look for in an applicant.