Being denied for a new credit card is not a good feeling to say the least. More than likely if you’re like the rest of us, you’ll probably be looking for somewhere to lay the blame for that nasty feeling of rejection. You’re first reaction may be to blame your credit score, but not so fast! Banks and lenders definitely weigh a credit score heavily in their decision as to whether or not to grant a credit line but the scrutiny doesn’t stop there.
In recent years it has become fairly difficult to become approved for a credit card especially cards with reasonable terms. If you already know that you may not have the best credit history and have your fingers crossed during the application process it’s important to remember that lenders are being particularly picky these days. Rather than take it too personally take the opportunity to turn your credit history around and proactively make some changes so that down the road you’ll be the consumer banks drool over.
If you find yourself dumbfounded at having received a decline notice for that new credit card it really may not be your credit scores fault! People with even the best credit history with scores in the clouds can and do get turned down for new lines. You should know that credit issuers also consider other factors before they will approve you:
Income & Debt– Unless you receive a “pre-approved” credit offer (and be careful of these!) you’ll have to complete a full credit card application. Your income plays a very important role in their decision making process. By authorizing lenders to check your credit score you allow them a full insight into your financial and to some degree, personal history. Credit issuers will weigh what is known as your debt to income ratio. This ratio is calculated by comparing your paycheck to what you already have in the debt category. If this ratio is too high banks worry you’ll be spreading your funds too thin and you may not be able to meet your payment obligations to them.
Job History & Lifestyle- Yes, your credit history actually includes your job history and your history of addresses. Lenders will actually throw into consideration if you’ve had 7 jobs or moved 5 times in the past two years. Though you may have a perfectly reasonable explanation for it, lenders can choose to view this as an inconsistent lifestyle. This may cause them to worry, again, that you may not be able to pay your credit card bill.
You Don’t Spend Enough- You read that right. Credit card companies are just that, companies, and they like you to spend money with them. If you show a consistent history of keeping low or zero balances on your existing cards, the card you are applying for may lose interest in you as a customer. Keeping a low balance on your card means they can’t collect interest from you and then they close the credit card.
Do you know what your credit score is?