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Credit Card Application Denial Reasons: The Top 5

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Credit card application denial isn’t pleasant news to hear. If you’re turned down for a credit card, the first thing you want to know is why. And the answer is usually right inside your credit report. Usually, your credit score, also known as your FICO score is too low. You want to do what you can to keep your FICO score as high as possible. Credit card application denial often happens for these 5 reasons that can be found in your credit history. Here’s what you should look out for, and what you can do to repair your credit.

The Top 5 Reasons for Credit Card Application Denial

  1. You have a collection, public record or charge-off. If you have an old debt that went to a collection agency, or even worse a debt that the company decided wasn’t collectible (called a charge-off), on your credit report, if can lead a credit card company to believe they may have problems collecting money you owe them. And that will result in credit card application denial. The solution: pay off that old debt. If it’s been charged off, there’s a chance you can negotiate with the creditor to accept a lesser amount as payment in full. If it’s a charge-off, then the company wasn’t expecting it to ever be paid. If you tell them you can pay them today, just not as much as was owed, the may agree. They’d rather have some money than none.

  2. Your available credit is too low. Your credit score is effected by your balance to available credit ratio. Add all of your credit limits together. Then add all of your credit card debt together. Divide the debt total by the limit total, and you get the percentage of your credit limit that is spent. The percentage of credit that remains available is a number you want to keep high. Pay down your balances. Then credit card companies will see that you have credit available, and your credit cards aren’t maxed out.

  3. You’ve made minimum progress paying debts, or you’ve made credit card or loan payments late. If you’ve paid off very little of your other debt, that can be a red flag to a creditor that you might have trouble paying them. Try to pay more than the minimum payment each month, get your balances lower, and it will improve your FICO score. And make sure you pay on time, every time. If your credit history shows a delinquent payment, the more recent it is determines how much it will hurt you chances of getting a cred card application approved.

  4. You’ve opened too many credit cards or lines of credit recently. Even if your credit card balances are low, opening too many in a short time frame can cause credit card application denial. This is a good reason to skip those store credit cards that will get you a small discount if you complete an application.

  5. You have too many credit inquiries. Every time someone checks your FICO score, it is noted on your credit report. Even if your credit history doesn’t show too many credit cards obtained recently, but if you’ve had many inquiries at the same time it can be a problem. It can appear as though you’re seeking a lot of credit from multiple companies. That can cause credit card application denial because it lowers your credit score.

Credit card application denial can be confusing. You are entitled to a reason. If the reason is low FICO score, you may not know why. You’re entitled to a free credit report. Get your credit report (your inquiry shouldn’t hurt your FICO score) and look for these common problems.

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