Applying for a credit card is one of the fastest and easiest ways to build your credit score – and if you’re low on cash, a credit card can help you through a financial jam. However, your enthusiasm over getting approved for a new card could come to a screeching halt if you receive a rejection letter.
A credit card denial can come as a complete surprise, especially if you feel that you’re a good candidate for a new account. But when reviewing applications, credit card companies take many factors into consideration, only approving applicants with a low default risk.
Reasons Your Credit Card Application Can Be Rejected
1. The Application Is Missing Information
If you hastily complete your credit card application, you may inadvertently skip a few boxes. Credit card companies require detailed information about you, such as your full name, your address, and your income. If you omit important information from your application, the credit card company will deny your request, in which case, you have to reapply.
To ensure you do not make this mistake, apply for a credit card online. While you can easily send off an incomplete paper application, online forms do not submit your request until you’ve complete all required fields.
2. You Are Too Young
Regardless of whether you have a job or another income source, you cannot apply as the sole account-holder of a credit card if you are under the age of 18. Furthermore, if a credit card company were to approve your application as a minor, they cannot take legal action if you default on a bill.
Despite this restriction, persons under the age of 18 can obtain a credit card – but it requires a parent to cosign and include his or her name on the account. Alternatively, a minor can be listed as an authorized user of a parent’s account, which means all payment activity and account history will appear on the minor’s credit report. Keep in mind that becoming an authorized user can be risky for all involved, as any negative account activity will show up on both the primary and authorized users’ credit reports.
Lastly, minors can always obtain a prepaid credit card. Prepaid credit cards don’t build a credit history, but they can teach young people how to make a budget and use a card responsibly.
3. You Do Not Earn Enough Income
Credit card applications invariably ask about annual income. Credit card issuers have minimum income requirements, but they don’t always disclose them on the credit card applications. This minimum varies between cards and issuers, and if you don’t meet the minimum, your application will be denied.
In this case, you must wait until your income increases and then reapply. You can also reapply with a joint applicant, in which the credit card company determines approval based on your combined income. To avoid this headache, shop around and compare different credit card offers. Call credit card companies directly and inquire about the minimum income for approval.
4. There Is Negative Information on Your Credit Report
Information on your credit report directly influences whether a credit card application is approved or declined. Even if negative information is reported in error, it can still trigger a rejection. Therefore, it’s up to you to get a free credit report and review it for accuracy. Carefully review each line of your credit report, and take note of erroneous information. Write the bureaus to dispute this information, as this will prompt an investigation in which the bureaus will delete any negative information reported in error.
Of course, if your credit report accurately reports negative information, you must take immediate steps to rebuild your credit score. Be sure to pay your creditors on time by setting a schedule or utilizing automatic bill payments, and settle all delinquent accounts. Wait until your credit score improves, then reapply for the credit card you desire.
5. You Have Too Much Existing Debt
The more debt you have, the harder it is to get new credit. In addition to a good payment history and steady income, your debt-to-income ratio needs to be low enough to be approved for a credit card. This is the percentage of how much debt you have relative to your monthly income. Credit card issuers also don’t like to see that you’ve maxed out your existing lines of credit. High debt translates into a risky applicant, as issuers believe you’re more likely to default.
If you’re denied a credit card because of debt, develop a debt elimination plan to pay down your credit card balances and other loans. Pay more than the minimum each month or pay down balances with money from savings. Aim to keep your balances less than 30% of your credit limit, and your debt-to-income ratio well below 36%.
6. Your Employment History Is Unstable
A consistent employment record also plays a role in credit card approvals. If you hop from job to job or were recently unemployed, a credit card issuer may view your employment and income as unstable. Wait until you’re on a job for at least six months to one year before applying for a credit card.
A credit card rejection certainly isn’t the end of the world, and while one credit card company may deny your application, another company may approve you. It also pays to apply for a credit card that’s right for your situation. For example, some credit cards cater to people with low credit scores and low income. Do your homework before completing your application, and you’ll lower your risk of a rejection.
What obstacles have you encountered when applying for a credit card?
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.