Why Can’t I Get Approved For A Credit Card With Good Credit?
You’ve worked hard and been disciplined to earn your high credit score.
But now, you’re application for a new credit card is being rejected.
Surprisingly, this does happen from time to time, but it probably has you wondering: Why can’t I get approved for a credit card with good credit?
There are a few likely causes of this, some of which you can control, some of which you cannot. We explain both and let you know what you can do about it.
Things you can control when your credit card application has not been approved, despite good credit
Before we should dive in, we should make sure we’re on the same page about what constitutes “good” credit. While there is no official industry-wide definition, each credit card company sets there own standards about which customers they want in which products, there is a pretty standard range.
Generally, “good” credit means that you are what’s called a Prime borrower or better. Most credit card companies consider consumers with about a 660 credit score prime. Some consider scores as low as 640 to be the start of their Prime range. A borrower with a Prime credit score can reasonably expect to be approved for most cards, most of the time. This isn’t guaranteed though, see the section below for things out of your control for more details.
Note that there are also “Super-Prime” borrowers. Again the exact score range for this varies from card to card, but most consider a credit score above 740 or so to be Super-Prime. These borrowers can expect an even higher approval rate, faster approval, and access to the very best credit cards.
When a credit card application is denied, it might be your fault, but it also might not be. That’s why we’re dividing this explanation into two parts; things you can control (this section) and things you cannot.
Some of these items in your control can be fixed instantly, some will probably take longer.
We will list them in roughly that order, starting with the easiest and fastest fixes, then moving to the harder and longer ones.
- You made a mistake on your application. This one is fairly self-explanatory, but you might be surprised how often it happens. Credit card applications can be a bit tedious to fill out, so many of us rush through it. It’s easy to make a typo. But if that typo was in a critical field, like your social security number or your current income, that could have large ramifications.
- Change in income reported. If you’ve reported an income different from the last time you reported your income to a credit card (either through an application or through an annual update), your application might have been denied on this basis. Of course, this is more likely if your income went down substantially. However, it can also happen just because there’s been a change, too. For example, if you’ve reported a large increase, a credit card company may think you’ve changed jobs and be less sure about how stable that income is.
- Too many credit inquiries. If you’ve been shopping around a lot for credit cards and/or other types of loans, you may have a lot of inquiries on your report. Numerous inquiries can lower your score. It can also signal to lenders, like credit cards, that you may be filling out many applications because other lenders are turning you down. Or it might signal that you are attempting to take out substantially more debt than you currently have, making you a higher risk in the lender’s eyes.
- High debt-to-income ratio. While lenders like credit card companies look at your overall credit score, they also consider the individual attributes that make up that score too. If one is out of their preferred range, that can get you dinged. The debt to income ratio is a good example, where some people can manage to have a strong overall credit score, despite this one attribute not being as strong. But it’s an important attribute, so a particular credit card might not let it slide if the ratio is too high.
- Insufficient credit history. If you don’t have a long enough credit history, some companies will not lend to you. In other cases, they may lend to you, but only for certain products. If you don’t have much credit history, student or secured credit cards are often your best bet to get started.
- Delinquencies and/or collections. Similar to the debt-to-income ratio, this is just one attribute that makes up your credit score and some people are able to overcome having a bad rating here and still have a relatively strong overall credit score. But, not all credit cards will see it that way. Many will have recent delinquency or collections as an automatic ‘no’ in their criteria. It can be tough to know if this is the problem though, since each card might have different criteria for how recently they might allow one of these to show on your credit report.
Did you know?
According to the Fair Credit Reporting Act, if you’re credit card application is rejected, the credit card company MUST provide you with a reason for the denial. If you don’t receive a timely notice for the reason, try contacting the company directly.
What’s out of your control when your credit card application is denied
As you can see in the graph above, even if you have very strong credit, it’s no guarantee of approval.
In fact, we were surprised to find that only ~85% of applications by super-prime borrowers (credit scores over 740) are approved.
There are a few different ways in which you might be a very strong borrower overall, but just not what that credit card company is looking for. We’ll cover the main ones.
Credit Card Company Requirements
Credit card companies look at their entire portfolio of customers and generally want to have diversification within that portfolio to mitigate risk. They might restrict how many people they allow to be their customers, for any product, from a certain state, for example. This isn’t really in your control, since you’re not going to relocate just for one credit card.
Geography is just one example, though, as credit cards will look across all kinds of different attributes, to try to make sure they don’t have too much customer concentration in any one area or attribute.
Credit Card Product Goals
Similar to how the overall card company builds its portfolio of customers, they are doing the same thing within their different products. Believe it or not, some products are specially meant for and target customers that they perceive to be of lower quality.
For example, within the credit card industry, it’s well-known and accepted that “near-prime” customers are risky but highly profitable if you acquire the right ones. So, if you have good credit, but were denied, it could actually be because you’re “too good” of a customer, where the credit card is actually looking to take on riskier customers, who they can likely charge higher interest rates too.
Other Customers Like You
Finally, the credit card company or product may be seeking to build a loan “book” of business with certain diversification targets. Perhaps they are offering a promo to drive customers in the door. But, they may have already filled their quota for customers with similar credit scores or other attributes to you.
What to do if your credit card application has been denied
You have a few options, which we’ll list below.
- Appeal the decision. This is an option, but not a strong one. Unless it was due to a mistake on either your or their end, the decision is unlikely to be reversed. But you can ask to try. Not all companies/cards will allow or consider an appeal.
- Apply to other cards. This is your most likely course of action. Remember that you may have been denied for a reason outside of your control.
- Use a different type of financing. Recall that credit cards are just one form of payment and borrowing. If you’re using it for payment, consider that you have alternatives. If you’re using your card to borrow, you probably have better lending options, like a line of credit.
- Fix errors on your credit report. If you’ve been rejected, it might be worth combing ov your credit report and making sure everything looks correct. Hopefully, you’re checking this periodically already, but we know not everyone does. Remember, you have a right to fix errors on your credit report.
- Give it time. Again, the rejection may not be because of your specifically. You can consider waiting a few months or a year and re-applying. We suggest considering if the rejection was due to the things we listed as in your control first, though.
- Consumer Financial Protection Bureau
John has always been fascinated by money, wealth, and investing. He got a front row seat into how Ultra High Net Worth individuals, families, and entities manage their money while working for years in Goldman Sachs’ Private Bank.
He learned a great deal about personal finance and wealth management from some of the most experienced professionals in the industry.
Now he enjoys helping all kinds of people grow their wealth and achieve their financial goals.
When he’s not advising clients, Cody enjoys playing golf and spending time with family and friends.