So You Were Declined a Credit Card Application: What to Do Next
Rejection is never fun, especially when it comes at the hands of a credit card company. The first order of business after credit denial is to find out why you were rejected and whether or not your finances had something to do with it. From there you can work to improve your credit score and re-apply to cards that fit your personal financial needs.
Continue reading for a step-by-step guide on checking your credit history, improving your score, and reapplying for a new credit card after an initial rejection.
Read the Rejection Letter & Find Out Why You Were Denied
The Fair Credit Reporting Act specifies that credit card companies are required to notify you after denying your application. This is called an adverse action notice and it should tell you the credit bureau that supplied the report and the exact score the issuer used. We recommend using this information to help you determine the steps to take to improve your credit. Listed below are some of the reasons you may be denied a credit card.
Reasons Why Your Credit Card Application Was Denied:
Your credit score is too low
Your credit history is limited
Your income is deemed insufficient
You have too much debt to your name
You are younger than 18
You have a recent bankruptcy
Improve Your Finances & Credit
After receiving your adverse action letter, it’s always a good idea to check your credit report to get a better understanding of what you can improve. You can access your report for free from any of the three main credit bureaus including Experian, Equifax, and trans union. If you’re young or recently moved to the United States, you may not yet have an active credit file and score. You can learn how to start a credit file in the U.S. here.
The best way to improve your finances is to practice positive credit habits. We recommend starting with these tips:
Never miss payments
Catch up on any past-due payments
Only apply for new accounts when needed
Build up your credit file with things like secured cards or credit-builder loans
Understand How Applying Affects Your Score
Applying for credit may impact your credit score in a few different ways. When you apply, the creditor completes a “hard” pull of your credit report. A slight drop in your score may result, but should only remain on your report for a matter of months. This shouldn’t discourage you from shopping around for the best credit card offers. Keep in mind that a denied credit card application won’t affect your score any further than the initial inquiry.
With that said, credit card approval can actually help your score! Adding a new credit account to your file lowers your overall utilization and in turn, boosts your report/score. Learn more about how applying for a credit card affects your score.
Apply for a Credit Card That Fits Your Finances
Once you take some time to improve your credit file, you can go ahead and reapply for a new card. If you need a card right away and are worried about another rejection, a secured card could be the way to go. A secured card requires users to provide a deposit to the card issuer, which acts as your credit limit. Secured cards are similar to debit cards, but they allow to build credit with proper use.
If you decide to apply for another unsecured card, it’s a good idea to check for preapproval and whether or not your credit score fits in with the card’s range. You can also use sites like Upwardli to help you compare cards. If you’re a new immigrant to the United States, we recommend checking out the Petal, Sable, Deserve, and Jasper Cards.
Questions to Ask Before Applying for a Credit Card
Does the card have any annual or hidden fees?
Is it a rewards card?
Is there a sign-up bonus?
What is the APR?
At Upwardli, we understand how tough it can be for newcomers to navigate an entirely new financial system and how important it is to start a new life with a solid financial base. We can help you find the financial services and providers you need to succeed in your new life.
