Can You Be Denied Credit Despite Having A Good Credit Score?

 

Do you have a good credit score?

Well, that’s great buddy! By the way, are you planning to opt for a credit card?

If yes, you can get a credit card with a suitable interest rate! But the irony is, having a good credit score does not necessarily mean your credit card application will be approved!

Because a credit score is not the only factor to decide whether or not you’ll qualify for a credit card! Several factors can lead to denial of your credit card application! Creditors will hardly tell on your face that your credit card application is denied. Rather, they will send you an adverse action letter within 7 to 10 business days of your application.

You might be thinking that you have good credit, but why do you keep getting denied? Have you ever thought about the possible reasons?

Let’s find it out!

Your income is not sufficient

Maybe, your income is not high enough for the credit card you are applying for! What happens is that the minimum income required depends on the credit card issuer. The 2009 CARD Act prohibits creditors from issuing credit cards to people who cannot repay the outstanding balance on their credit cards.

If your paycheck does not meet the minimum income criteria then your credit card application is likely to get denied. That’s why you need to figure out which credit card is apt for you, based on the income ceiling.

Your outstanding balance is too high

Credit card companies check your credit utilization ratio, which accounts for about 30% of your credit score. In other words, how much credit are you using from your available credit limit?

If you are using too much of your available credit or you are maxed out, you can be denied the credit card application. The reason being, your creditors can think you are not a creditworthy person.

So, it’s best to keep your credit utilization ratio below 30%. Your chances of getting approved for a new credit card increase!

You have a limited credit history

Are you applying for a top-tier credit card?

If you have a short or nonexistent credit history, your application is likely to be denied! Banks or credit unions want to see how responsible you are about credit before extending a credit line to you.

Without a credit score, the credit card company is likely to have an impact that you don’t have any creditworthiness.

If you have a limited credit history, look for starter credit cards to get your credit card application approved!

You have too many credit cards

Do you have multiple credit cards?

If yes, it can pose a risk to the approval of your credit card application! Creditors often consider the number of credit cards you have when they decide whether or not to approve your application.

You might be handling your credit cards well. But usually, the creditors don’t want to take a risk to grant you a credit card.

You have a collection or delinquency on your credit report

Credit card companies may consider the number of delinquent accounts in your credit report to decide whether or not to extend you a credit line.

Well, if you have any account past due, it becomes a delinquent account. However, many creditors won’t report an account to the credit bureaus until 30 days after the missed due date.

But a late payment can stay on your credit report for up to 7 years from the time it happened! Your credit score will also take a hit as your payment history gets compromised.

Let’s say, you are denied a credit card application. But does getting denied for a credit card hurt your credit score?

Well, your credit score may drop, regardless of whether or not your application is approved or denied.

The reason being, when you apply for a card, the creditors usually do a “hard inquiry” before approving or denying your application.

In short, the more applications you make, the harder inquiries you are going to have on your credit report! Eventually, your credit score will take a hit!

I would suggest you stop applying for credit for at least 6 months. Hopefully, your credit score will rebound!

Well, I hope, now you have understood why your credit card application got denied. So, the bottom line would be, you should know about the approval requirements of the credit card you are applying for!