Most of us will apply for a credit card at one point, and for many different reasons.
You might be just starting out and attempting to build credit, or you might be hoping to expand your access to credit, often for business purposes.
No one applies for a credit card hoping their application will be rejected, but it happens–sometimes quite frequently. The National Foundation for Credit Counseling offers a few reasons why your credit card application might be denied.
- Not enough existing credit: Lenders prefer to see a track record of your past credit history. Face it, we all have little dings on our credit report, but the credit card companies will overlook those if you have a strong record of past credit activity.
- Poor payment history: This factor has a big impact on the decision-making process for a lender. A history of skipped or late payments does not sit well with any lender.
- Overall debt is too high: A person’s debt-to-income ratio is a reflection of how much is owed compared to your income. Lenders take into consideration all of your monthly expenses before awarding credit.
- Too many inquiries: Attempting to obtain too much credit at once will raise a red flag with lenders. Too many inquiries or recently opened accounts can make a lender uncomfortable with awarding you credit.
- Serious negative notations: Unpaid tax liens and Chapter 7 bankruptcy can remain on a credit report for up to 10 years. Other negative notations include foreclosure, late and missed payments, collection accounts, and chapter 13 bankruptcy, all of which usually stay on your report for seven years.
These are just a handful of reasons why your credit application may be declined. Others include insufficient income, unstable job history, and being too young to apply.
If you have little to no credit get started on building it. If you have a poor payment history the best thing you can do is to be diligent about making payments in full and on time. Always alert your creditors as soon as you run into trouble with making payments.