If you apply for a credit card, whether through an online system or by mail, the credit card issuer usually just runs your information through an automated program to make credit decisions. While efficient, sometimes it can cause an application to be rejected for one reason or another, even if you are a very creditworthy consumer.
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If you get rejected for a credit card, here are two things you have to do next.
First, figure out why
Thanks to the Fair Credit Reporting Act, or FCRA, consumers are entitled to a free copy of their credit report once per year if they get turned down for credit, in addition to the one freebie already allowed. While the creditor that rejected you will usually send you a letter with vague reasons for their decision such as "high balances on other credit accounts," if you obtain your full credit file, it can give you a better picture of what they are talking about.
Even with an excellent credit score, some creditors will turn you down automatically if you set off a "red flag" in their system, so first see if this might apply to you.
One common reason for rejection is opening a bunch of new accounts in a short time period. This can be a sign of desperation for access to credit, but there can also be very legitimate reasons for it. Perhaps you recently started a business and needed to open some business credit cards, for example.
Another reason could be that you have high balances on other credit accounts. According to credit scoring formulas, this could mean you're having trouble managing your debts, which can make you a bigger risk. Or, maybe there was a very good reason you decided to make some large charges. Maybe you decided to charge your child's college tuition and are planning to pay it back over a few months.
On the contrary, maybe you have a lot of open credit card accounts that you really don't use. This is a common reason for rejection, especially for credit cards offering big "welcome bonuses" like frequent flyer miles. Credit card issuers are in business to make money, and if they don't think you'll use the card, it could hurt your chances.
So, when you get your credit report, take a look for anything that could have stood out as a red flag. You can request your credit report for free here, and this is the only way to get it under the FCRA's rules. Most other websites advertising "free credit reports" are really trying to get you to sign up for their other services, like credit monitoring, and will ask for your credit card information. Don't be fooled.
Then, ask to be reconsidered
One tool at your disposal is the "reconsideration" phone numbers, which most credit card issuers have, but many people don't know about. And, the success rate when calling can be fairly high.
Bear in mind that if you were rejected for a good reason, like late payments on your other accounts, you're unlikely to have a positive outcome. On the other hand, in many cases the issuer simply needs you to explain something that stood out to them on your credit report, like the situations mentioned above.
If you've opened a lot of credit accounts recently for a good reason, explaining why can make a big difference. Or, let's say you want a Delta-branded credit card and already have a US Airways card. Explaining that you want the Delta card because their flights are more convenient to your schedule, and assuring that you actually spend money on the card could be all they need to hear. Or, simply saying some good reasons you want that particular card can do the trick, like "the no foreign transaction fee is important to me, since I travel often."
If you genuinely think you deserve to be approved, here is a good list of the reconsideration lines of some major credit card issuers, as well as some good tips regarding what to do (and what not to do) when you call.
Why it's important
First of all, no one likes to be rejected for a product they want. If you find a certain credit card product that meets your needs better than the others, it simply makes financial sense to try and get it, if at all possible.
Second, for most people, being rejected for one credit card means they'll need to apply for another, and this produces more inquiries on your credit report. Too many inquiries can lower your credit score, making it even harder to get approved for future purchases.
In a nutshell, you should use the tools you have at your disposal to try and get it done the first time, or at least figure out what you're doing wrong before you try again.
