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It’s something you never saw coming (or perhaps did but chose to ignore): your credit card application was denied.
According to a recent Bankrate survey, 24 percent of Americans have been denied a credit card due to their credit score.
Though seemingly harmless, credit denial risks lowering your credit score. Each credit card application requires a hard credit check that can potentially lower your score. Additionally, when you’re denied, rather than approved, you don’t receive the score-boosting benefit of a new line of credit.
You might be asking yourself “now what”?
When it comes down to it, various factors can influence why your credit card application was denied — it might just take a little digging to find out what they are.
Find out why you were denied
You may know why you’ve been denied a credit card, but if you don’t, the first step is determining the cause.
A few of the most common reasons for credit denial include a low credit score, a short credit history (or no credit history), submitting too many credit card applications within a short time frame or a problematic payment history.
Here are a few ways you can determine why your application was denied:
Take a close look at your adverse action notice
According to the Fair Credit Reporting Act (FCRA), passed in 1970, any time information from your consumer report is used against you (such as to deny a credit card application), the consumer must be told why.
That’s where your adverse action notice comes into play, which you’ll receive 7-to-ten business days after your credit denial. The notice — sent from whichever issuer you applied to — details why your application was denied.
In the case of credit denial due to your credit score, you’ll also be sent a breakdown of your score.
Request a free credit report
After credit denial, you’ll want to request a free credit report to check your score. Your bank or some of the credit cards you already own may offer free credit score tracking via mobile app or online account, but if you’re unsure, you can use Bankrate’s free credit score reporting and monitoring.
With this tool, you can view your payment history across all of your accounts, along with suggestions on how to improve or maintain your credit score.
Read-up on issuer card application criteria
A lot of issuers have rules in place around how often you’re allowed to apply for their cards within a certain timeframe. If you’ve recently obtained a card and then applied for another with the same issuer, this could potentially be the problem.
For example, Capital One only allows one card approval every six months. If you were approved for the Capital One® Venture® Rewards Credit Card four months ago and recently applied for the Capital One® Savor® Cash Rewards Credit Card, chances are you’ll be denied.
Chase is another issuer known for their application limitations. According to the issuer’s 5/24 rule, if you’ve opened five personal cards within 24 months (from any bank), you won’t, in most cases, be approved for a sixth card with Chase.
Proceed and apply with caution
Depending on why your credit card application was denied, you may be able to apply for a different card.
If you were turned down because your credit score is at the lower end of the credit range (poor-to-fair credit is considered to be credit scores between 580 – 669), for example, or you simply didn’t have enough credit history, consider applying for a secured credit card. These cards can help you build or rebuild your credit, with some offering rewards for your purchases.
The Discover it® Secured card rewards you with 2 percent cash back at gas stations and restaurants (up to $1,000 in combined purchases each quarter) and 1 percent on everything else. Better yet, the card doesn’t charge an annual fee and all your cash back earnings will be doubled at the end of your first year.
It’s important to have a firm understanding of your financial health before applying for a credit card. Here are a few things to keep in mind going forward:
- Do research based on eligibility: While researching your next credit card, stick to card categorizations you fit into. Bankrate sorts cards into categories based on level of credit: excellent, good, fair, bad and no credit.
- Sift through the issuer’s application rules: If you own multiple cards from the same issuer, it doesn’t hurt to double-check their application policy.
- Continue striving for overall financial health: Make sure you’re making payments on time, knock-out any lingering debt and keep a close eye on your credit score in the process.