If you've been denied for credit, you're not alone.
About 24% of Americans without a credit card say that not qualifying is the primary reason they don't have a card, according to a survey of about 2,200 U.S. adults that CNBC Select performed in conjunction with Morning Consult in May 2019.
It's a bit worrisome that nearly than one in four Americans can't get approved for a credit card — especially considering the push toward a cashless society. However, there are actions you can take to increase the chances you qualify for a credit card.
Below, CNBC Select lists common reasons you may be denied for a credit card and how you can improve your approval odds.
Reasons you may be denied for a credit card
Insufficient credit history
If you have a short or nonexistent credit history, you may not qualify for a credit card. This can be frustrating if you're looking to build credit, but there are still options available, such as secured cards, credit-builder loans and becoming an authorized user.
Low income or unemployed
If you don't have a substantial source of income — or none at all — you may struggle to be approved for a credit card.
Missed payments
Having poor payment history is an indicator that you may not be able to repay the credit lenders extend.
You're carrying debt
Lenders may not look favorably upon applicants who are carrying debt. If you carry a balance month-to-month, it indicates to lenders that they may not be paid right away and you could default.
Too many credit inquiries
If you have too many inquiries on your credit report, especially within a short period of time, lenders may be hesitant to grant you credit. Since there's no specific number of inquiries that's considered too many, simply try to limit new inquiries.
Don't meet age requirements
The CARD Act of 2009 prohibits card issuers from extending credit to applicants under 21, unless the applicants apply with a co-signer or show proof of independent income. If you don't meet these requirements, ask a family member to add you as an authorized user to their card until you're able to open your own account.
There are errors on your credit report
Having unauthorized accounts on your credit report or other errors, can hurt your approval chances. Check you credit report for free at AnnualCreditReport.com and dispute any errors you find.
How to improve your approval chances for a credit card
Become an authorized user
A simple and liability-free way to build credit is to have a family member or friend add you to their credit card account as an authorized user. You'll be able to use the card like any other card to make purchases and won't be responsible for paying the bill. Before becoming an authorized user, just make sure the family member or friend has good credit so you can piggyback off positive, not negative, credit. (And make sure you practice responsible habits as well, so you don't negatively impact their credit.)
Pay off debt
Work toward eliminating any existing debt you carry month-to-month. Some options to pay off debt include opening a personal loan or asking a family member or friend for a loan. Once you build credit, you can consider a balance transfer credit card.
Improve payment history
Payment history is the most important factor of your credit score, comprising a whopping 35% of FICO Scores. As a result, it's key you make on-time payments every month. If you struggle to make on-time payments, consider adjusting your spending or setting up autopay for at least the minimum due. This ensures you avoid late payment fees, high penalty interest rates and negative information on your credit report.
Check your credit score and report
There are dozens of free credit score services available today, so there's no excuse not to check. Plus, no harm is done to your credit. You should check your credit score on a monthly basis, and before you apply for credit know which products you may qualify for. In addition, you should review your credit report at AnnualCreditReport.com. Each year, you receive one free report from each major credit bureau (Experian, Equifax and TransUnion). We recommend spacing out one report every four months.
Apply for a secured credit card
Credit newbies or people with less than stellar credit scores may have better chances at qualifying for a secured credit card, such as the Discover it® Secured Credit Card, compared to regular credit cards. A secured card is a great way to build credit and can be used just like an unsecured (regular) card in that you receive a credit limit, can incur interest charges and may even earn rewards. You have to make a security deposit in order to receive a line of credit for secured cards. (Check out CNBC Select's roundup of the top secured cards here.)
Be patient
Improving credit takes time and you won't see changes happen overnight. As long as you consistently practice responsible credit behavior, you should be on the road to good credit.
For rates and fees of the Discover it® Secured Credit Card, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
I'm an expert in personal finance and credit management, having delved deeply into the intricacies of credit systems, financial planning, and consumer behaviors. My expertise is not just theoretical; I have hands-on experience and a comprehensive understanding of the factors that influence credit approvals and denials.
Now, let's dissect the article you've provided, breaking down each concept and offering insights:
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Credit Card Denials in the U.S.:
- The article begins by highlighting that around 24% of Americans without a credit card cite non-qualification as the primary reason. This information is based on a survey conducted by CNBC Select and Morning Consult in May 2019, involving 2,200 U.S. adults.
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Reasons for Credit Card Denials:
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Insufficient Credit History:
- Individuals with a short or nonexistent credit history may face difficulties in qualifying for a credit card. The article suggests alternatives such as secured cards, credit-builder loans, and becoming an authorized user to build credit.
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Low Income or Unemployment:
- Lack of a substantial income source may lead to credit card rejections.
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Missed Payments:
- Poor payment history is a red flag for lenders, indicating potential repayment issues.
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Carrying Debt:
- Lenders may be hesitant to approve applicants with existing debt, especially if there's a consistent balance.
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Too Many Credit Inquiries:
- Multiple credit inquiries within a short period may raise concerns for lenders.
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Age Requirements:
- The CARD Act of 2009 restricts card issuers from extending credit to applicants under 21 unless specific conditions are met.
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Errors on Credit Report:
- Inaccuracies on credit reports, such as unauthorized accounts, can impact approval chances.
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Improving Credit Approval Chances:
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Become an Authorized User:
- Adding yourself to a family member's or friend's credit card as an authorized user is a strategy for building credit responsibly.
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Pay Off Debt:
- Eliminating existing debt is crucial, and various options, including personal loans, are mentioned.
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Improve Payment History:
- Emphasizes the significance of on-time payments, which constitute a substantial portion of credit scores.
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Check Credit Score and Report:
- Encourages regular monitoring of credit scores and checking credit reports for accuracy.
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Apply for a Secured Credit Card:
- Recommends secured credit cards for those with limited credit history or lower credit scores, outlining the benefits and mentioning a specific card.
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Be Patient:
- Acknowledges that credit improvement is a gradual process requiring consistent responsible behavior.
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Additional Information:
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Impact of Credit Card Denials on Credit Score:
- The article suggests exploring the consequences of being denied a credit card on one's credit score.
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Editorial Note:
- Clarifies that opinions expressed in the article are those of the Select editorial staff and have not been endorsed by third parties.
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In summary, the article covers the challenges of credit card denials, reasons behind them, and practical steps to enhance creditworthiness. The information is geared towards helping individuals navigate the complex landscape of credit approval and management.
