Denied a Credit Card? Here’s What to Do Next

Seven. That’s how many reasons you could be denied a credit card. 

What’s that about? Well, chances are good that you haven’t built a credit history. A strong credit history requires a few months of successful swiping, minimum. If you don’t have that, it’s time to strategize.

Other common reasons for credit denials: you’re applying for the wrong cards, or you’ve sent too many applications. Things get twisty when you freeze a credit account, too.

Solutions are there for each and every credit denial. 

First-time user? You can pick from a variety of easier-to-get cards. These are products you use to build credit, like student cards or secured credit cards. Think of them as stepping stones on the way to credit greatness; they’re temporary solutions that could help you build credit so you can upgrade later.

There’s a silver lining to being denied a credit card (what creditors call an adverse action). A denial is a sign your credit might be weaker than you expected. The silver lining? Better to figure that out now than down the road, when the uphill climb is steeper.

Kudos on developing your credit card know-how. You’re treading the path to stronger finances. Now learn what to do if your card is denied, and improve your chances of getting your next credit card approved.

Freedom Debt Relief is not a Credit Repair Organization and doesn't provide or offer services or advice to repair, modify, or improve your credit.

Why You Keep Getting Denied When You've Never Had a Credit Card

Getting denied for a credit card can be demoralizing. Getting denied when you’ve never had a card is just plain confusing. How do they know to deny you? Turns out, they don’t. And that’s the rub—they don’t know enough to make an informed decision.

You have zero credit history

Without a credit history, you might be denied a credit card. Which, you know, makes it awfully tricky to build a credit history.

If that sounds like a chicken-and-egg problem, you’re spot-on. Fortunately, there are credit-building products designed for exactly this. Student cards and secured cards can often be opened with zero credit history. Becoming an authorized credit user requires no history, either.

Why zero credit history is a problem: Creditors don’t know whether you use credit well. They rely on your credit report for that, and until you get to swiping, you don’t have one. You’re like Harry Potter under his magic cloak: invisible to lenders.

No credit history vs. bad credit

Having no credit history is not the same as having bad credit.

When you’re denied for having no credit history:

• Lenders can’t judge your track record.

• Credit bureaus don’t calculate your score, and reports are limited.

• Specialized products like secured credit cards could help you build credit.

There’s nothing wrong with having no credit history. Everyone starts there. Once you swipe for a bit, credit bureaus score you, and your score rises with timely payments. It might take a month or two to establish your VantageScore, and longer for FICO.

When you’re denied for having bad credit:

• Lenders see your track record, including late payments.

• Your credit bureau score (FICO or VantageScore) is considered.

Spoiler alert: The steps to good credit are the same, whether you have no credit or you have bad credit. 

• You need to have and use credit

• Pay your bills on time

• Avoid credit card debt

• Let your accounts grow older along with you

• Don’t apply for credit unless you really need to

We’re going to repeat those steps farther down because they bear repeating.

You may be too young

Minors can’t open credit products under their own names. But as a minor, you could become an authorized user on an adult’s card. That could raise your credit score while also giving you access to a credit account you can use (if the account owner lets you). 

Under 21? You need an independent income or a cosigner to open a credit card, thanks to the CARD Act of 2009. 

What it looks like to be approved for credit your first time

Here’s what it looks like to apply for a card as a first-time user:

• Choose a card.

• Request an application. Usually through the issuer’s website, but possibly through a bank branch.

• Fill in personal information. This includes Social Security Number (SSN), name, birthday, address, and contact info.

• Fill in financial information. This means employment status, how much you earn before taxes (annual gross income), your employer, housing payments, and big expenses.

• Submit your application to the lender.

The lender checks your income and your identity. Since it’s your first time applying, your credit score might not be as important as your income vs. expenses. The lender uses this information to decide whether to approve you for a credit card. If they think you’ll make timely repayments, you’re golden.

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What Does It Mean That I Was Denied a Credit Card?

A credit card denial means your lender thinks it’s too risky to give you a credit card. 

In short, credit card issuers use credit bureau data to determine whether you’re likely to pay back what you charge to your credit card. 

When you apply, the credit card issuer reviews your application and credit report. The company reviews many details, most of which can be found on your credit report:

• Your payment history

• Your debt balances

• Your credit limits

• How long you’ve had credit accounts

• Whether your balances are trending up or down

• How much your last payment was on your other debts

• What types of credit accounts you have experience with

• Whether you’ve applied for new accounts recently

• Your income, if you disclose it (it’s not on your credit report).

With this information, the issuer decides whether to approve your credit card application.

Reasons Your Credit Card Application Could Be Denied

Low credit score, high debt-to-income ratio, and recent delinquencies or bankruptcies are some of the most common reasons your credit card application could be denied.

Low credit score

It’s possible you simply applied for the wrong type of card. Top cards with attractive perks generally require excellent credit. Each lender sets credit score ranges and decides what to consider a “good” or “excellent” score. Generally, most consider a 670 or higher “good.” It’s possible to qualify for a credit card with lower scores, but maybe not a top rewards card. 

High debt-to-income ratio (DTI)

Your DTI is how much of your money you spend on debts each month. The formula is: monthly debts divided by before-tax monthly income. To lenders, it’s an indicator of whether you can afford a new payment. A healthy DTI ranges from 25% to about 50%, but the lower, the better. 

Recent delinquencies or bankruptcies

For lenders, few factors are as important as a history of paying bills on time. A recent bankruptcy makes a new credit card approval harder. In these situations, you might have better luck with a secured credit card.  

No credit history or thin credit file

You might be denied because you’re new to credit. It takes time to build your credit profile, about a month or two for VantageScore and six months for FICO. Without a credit score, many lenders won’t approve you. (You can still apply for products designed for new users.)

There are special requirements for young users. Under the CARD Act of 2009, if you're under 21, you must show independent income to get a traditional credit card, or have a cosigner. If you’re under 18, you can’t open a credit card in your name.

Too many recent applications

Each time you apply for a credit card, the lender performs a hard pull of your credit. This shows up on your credit report. Too many hard pulls in a short period signals to lenders that you might be too eager to take on debt. Wait six months or so between applications to avoid this issue.

Frozen credit report

Creditors can’t access your credit report when you’ve frozen your credit, sometimes called a "security freeze” or a “credit freeze.” Creditors are likely to deny you a card if they can’t access your report. Call your credit bureaus (or navigate to their respective websites) to unfreeze your account if you’d like to open a new credit product.

Wrong card type

You might be applying for the wrong type of credit card. There are two major card types: secured and unsecured. 

Secured cards are ideal for those with poor, thin, or zero credit history. It’s much easier to open one of these than an unsecured card. You put down a deposit, and that deposit typically becomes your credit limit. If you use a secured card well, you may be able to upgrade to an unsecured card in six to 12 months.

Unsecured credit cards require no deposit, and come with better perks. But they’re typically more difficult to open. You need to meet credit score thresholds, and if you’re under 21, you need a cosigner or proof of independent income.

Factors Lenders May Not Consider

It’s illegal to deny a credit card application based on discrimination. Lenders are forbidden from considering the following factors:

• Race

• Religion

• Gender

• National origin

• Sexual orientation

• Marital status

• Age

• Whether any of a person’s income derives from public assistance.

Once you find out why you’re denied, you can improve your next application.

How to Find Out the Specific Reason for Denial

Under the Equal Credit Opportunity Act (ECOA), your lender must let you know why your credit application was denied. They have 30 days to inform you, usually via email or a letter known as an adverse action notice.

If you don’t receive a notice:

• Contact the lender directly.

• File a report with the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC).

The notice lists reasons for rejection, which can often be summarized as “bad credit” or “no credit.” (The notice might phrase it differently.) 

If you’re denied for bad credit, the notice might quote:

• Delinquent payments

• High credit utilization

• Too many recent inquiries

• Bankruptcy

• Collection accounts

• Foreclosure

If you’re denied for no credit, the notice might say:

• Insufficient credit history

• No credit file

• Limited credit history

• Length of credit history too short.

You can trigger a reconsideration process by calling the dedicated line listed on your adverse action notice. If there is no number, you can call customer service and ask to be transferred to the right department. You’ll want to have info on hand to argue your case. This process is most useful when the denial reason is minor, or when you can provide additional relevant information that wasn't clear on the application, like a recent pay raise.

Diving deeper into why you were denied

Under the Fair Credit Reporting Act (FCRA), if you ask within 60 days of the denial, the lender must provide the key reasons or inform you of your right to know these reasons, typically within seven to 10 business days. This notice may come via letter or electronically.

If the denial is based on information on your credit report, the lender must do the following:

• Provide the three-digit credit score used in making the decision.

• Name key factors affecting your score.

• Give you the name and contact info for the credit reporting agency providing the report.

• Let you know that you have a right to get a free copy of your credit report from that credit reporting agency within 60 days of the notice.

• Explain the process to correct mistakes in your credit report or add information to make the report more accurate.

It may be worth asking for the reason(s). Then you know exactly where to focus your efforts for approval next time. Building good account management habits may strengthen your credit score long-term, setting you up for financial success.

What to Do if Your Credit Card Application Was Denied

Find out the reasons your credit card application was denied, and use that information to improve your credit situation. You might ask the credit card issuer to reconsider its decision.  

Consider alternative ways to build credit

It’s possible to build credit with a secured credit card, a credit builder loan, or as an authorized user on someone’s credit card account.

Secured credit cards: You make a security deposit (which typically becomes your credit limit), but otherwise, a secured credit card works like a standard credit card. After a period of consistent use, you can usually get your deposit back and transition to a standard credit card.

Credit-builder loans: These loans help you establish a positive credit history without taking on any debt. As you make on-time payments (with fixed interest), you establish your creditworthiness. The lender deposits your payments in a savings account or certificate of deposit, and releases the money to you once the loan is repaid. This is best suited for those with no credit history or with low credit scores. 

Authorized user: If you don’t have much credit history, ask a family member or close friend with good credit to add you as an authorized user on one of their cards. The primary cardholder is responsible for paying the bill, but both people get boosted credit if the bill is paid on time and the card isn’t maxed out.

Dispute inaccuracies on your credit reports

You can dispute inaccuracies on your credit report. Errors happen. According to the Federal Trade Commission, one in five people have errors on their credit reports. Many kinds of errors could affect your scores. Those errors could also affect eligibility for new credit, or lead to worse terms when credit is approved.

The Consumer Finance Protection Bureau outlines how to contact credit bureaus to report inaccuracies, as well as what you should say to get errors fixed. The easiest way to start is to click through the dispute process while viewing your credit report online.

You can contact credit bureaus Equifax, Experian, or TransUnion online, by phone, or by mail.

What your message to credit bureaus should include:

• Your contact information. Name, address, and telephone number.

• Credit report confirmation number. If available, this helps identify your report.

• Details of each error. List each error, including the account number if applicable.

• Explanation of the dispute. Clearly state why the information is incorrect.

• Request for action. Ask the bureau to remove or correct the information.

• Supporting evidence. Include a copy of the credit report section with disputed items circled or highlighted, plus copies (not originals) of supporting documents.

Credit bureaus must investigate your dispute, communicate details with the institutions that report to them, and tell you the results. 

You can take further action by directly contacting the companies providing the information to the credit bureaus. If your bank reports incorrectly to your credit bureau, you can contact the bank using certified mail, and should get a response within 30 days. Data furnishers must remove incorrect or verifiable information, and report changes to credit bureaus.

If all else fails, you can submit a complaint with the CFPB.

Steps to improve your financial situation for future applications

Improving your chances of approval usually means improving your financial situation, a task that may be difficult—but it is straightforward.

• Pay all bills on time.

• Add utilities to your credit score. Normally, your cell phone and utility bills aren't included in your credit report. Contact the credit reporting agencies to have these bills added. Paying them on time and in full could help improve your credit standing.

• Improve your credit-utilization ratio. If you have credit card debt, prioritize paying it down. Maintaining a low balance improves your credit score.

Lenders perform hard inquiries when investigating your credit details during the application process. Each hard inquiry could hurt your credit score for a bit, temporarily dropping it a few points. It’s usually not a big deal.

To re-apply for cards with the best possible credit score:

• Be strategic: Research and use pre-qualification tools to preview your approval chances. 

• Pay down balances first: Pay down your credit card balances before applying for a new card. Improving your credit-utilization ratio could improve your score. 

Hard inquiries matter, but if you apply for new credit sparingly, they have little impact on your credit approval chances. Paying balances on time and reducing credit card debt are the best things you can do to improve your credit standing and boost your chances of approval. 

Best Credit Card Options for People with No Credit History

No credit history? No problem. Many cards are available even when you have zero credit history. Some of these are secured or student cards. There are also store cards, which can be used as stepping stones to other cards.

Secured cards and starter cards designed for no credit

You open a secured card by putting down a deposit. You can often do so with zero credit history, since you’ve put down collateral. Pay it off consistently and on-time, and you should be able to eventually upgrade to an unsecured card and get your deposit back.  

Unsecured cards are typically more difficult to open, but some are designed for people with no credit history. These may consider niche factors like having a minimum balance in a linked bank account.

Student cards

You open a student card with your student ID. Student cards are like regular cards, except they’re designed for students, so are typically easier to open. Factors like GPA and part-time income may be considered.

Student cards typically offer modest rewards and low interest rates. But the prime perk is that they’re easier for students to open, which makes them great for building credit. Student credit cards usually don’t ask you for a deposit. You may be able to upgrade post-graduation.

Store cards

Store cards are typically easier to open than general-use credit cards. Store cards are branded, and give rewards specific to that brand, and low rewards for use anywhere else. APRs are usually on the high side. These are ideal when you shop heavily at a specific store.

Get pre-qualified for a credit card

Pre-qualification lets you see whether you’re likely to be approved for a card, but without actually applying. It doesn’t hurt your credit score. You can pre-qualify on lender websites. You provide basic info, and the lender quickly tells you whether you’re likely to be approved.

What to look for in first-time cards 

Here’s what to look for in first-time cards:

• No annual fee

• Low or no minimum deposits (for secured cards)

• Path to upgrade to an unsecured card.

• The card reports your payments and balance to all three credit bureaus (TransUnion, Equifax, Experian). 

Tips to Avoid Credit Card Denials in the Future

Try these moves to help you get approved when you apply for a new credit card. 

Check your credit report regularly for errors and accuracy

Some credit report errors can hurt your credit score. The major credit bureaus—Equifax, Experian, and TransUnion—provide you with one free credit report every week on AnnualCreditReport.com. 

If you find a mistake, follow the credit reporting agency’s instructions for disputing it. 

Pay your bills on time, and keep your debts low

Credit bureaus love it when you pay your credit card bills on time. Over time, on-time payments go a long way to helping you build credit. On the other hand, missed or recent late payments can really harm your credit standing. 

You get credit score points when you have credit and don’t use it. The more debt you carry on your credit cards, the more you risk hurting your score. Maxing out credit cards typically causes major credit score damage.  

Choose credit cards that match your credit profile and financial goals

Choosing the wrong type of credit card, such as one requiring excellent credit when yours is fair to good, could mean your application is denied. The secondary consequences of denied credit cards are typically minor—i.e., the temporary score drop—but can feel unpleasant.

Research cards and use pre-qualification tools to find cards that fit your credit profile. There are plenty of cards for bad credit. If approved, you can use these cards to build your way up to better financial products.

Common Mistakes First-Time Credit Card Applicants Make

Here’s what to avoid.

Applying for premium rewards cards first

Premium cards require excellent credit scores. If you’re a new user, you haven’t had time to get to an excellent score yet. Try applying for a student card or a secured card instead.

Not checking pre-qualification offers

Pre-qualification filters out cards you definitely don’t qualify for. It’s fast, free, and doesn’t hurt your credit score. When in doubt, pre-qualify via the issuer’s website.

Submitting multiple applications in a short time

Too many applications in a short period makes you look desperate, and hurts your credit score. Pre-qualify to narrow down your options before applying. Space out applications, if possible. Ideally, space them out to one or two every six months.

Not verifying income requirements

You might be denied because lenders feel you haven’t proved you earn enough income to make payments. This is typically an issue if you’re under 21 or haven’t provided the right documentation. Pay stubs and W-2 forms are the gold standard for verifying income.

Forgetting about student card options if eligible

Many students are eligible for student credit cards. These are designed for students with no or little credit history. Check which ones are available, and pre-qualify to see approval chances.

Not considering becoming an authorized user first

You can become an authorized user to build credit history without a credit card, and you can do so as a minor. The most straightforward option is to ask a close family member or guardian with good credit if you can become an authorized user on their card.

When Your Financial Situation Needs TLC

Credit card rejections might be a serious sign that your financial situation needs attention. If you want to know about other options for managing a large debt problem, our Certified Debt Consultants are available to discuss what you can do next. Learn about Freedom Debt Relief’s debt relief program, and see if it makes sense for your situation.