I have good credit — Why was I denied a credit card?

Quick insights

• While credit score is one of the determining factors lenders use when making credit decisions, it is not uncommon to be denied a new line of credit despite a good credit score.
• There are other factors that contribute to lenders' credit decisions, including the applicant's income, debt, credit history, credit utilization ratio and more.
• Read the lender's letter explaining the reason for your denial and work to remedy that before applying again.

Common reasons for credit card denial despite good credit

Credit score may be one of the largest factors lenders use when deciding whether to approve your credit card application, but applicants with a good credit score of 700 or above might still be rejected for a variety of reasons:

• Income: Creditors tend to determine one's credit limit based on an applicant's income. They want to ensure that, at the very least, you can afford to make your minimum monthly payment. It is therefore possible for you to have a 700+ credit score but be denied a new credit card because your current credit is already high relative to your income.
• Debt-to-income ratio: An arguably larger factor in determining eligibility for new credit is the applicant's current debt-to-income ratio. If your monthly debts are already over one third of your monthly income, you are less likely to be approved for a credit card than someone with a DTI ratio of 36% or less.
• Credit utilization ratio: A large factor in determining credit score, an applicant's credit utilization ratio also plays into lenders' decision-making regarding approval for new credit. If you are currently using 30% or more of your total available credit you may be less likely to be approved for a new card. This may be somewhat paradoxical, since approval for a new line of credit could help lower your credit utilization ratio.
• Negative credit history: One or more negative incidents, such as missed payments or a charge being sent to collections, can impact a lender's decision whether to extend a new line of credit.
• Age of applicant: If you are under the age of 21, you may be less likely to be approved for a credit card than older applicants with more established credit histories.
• Age of credit: Even if you are older than 21, your credit card application might still be denied if you have only recently started establishing a credit history. The older your current credit card accounts, the more likely you are to be approved for a new account.
• Frequency/timing of credit applications: Applicants who have opened one or more new credit card accounts in the past six months may be less likely to be approved for a new credit card.
• Credit card churning: If a lender suspects you of credit card churning — the practice of opening new credit card accounts to earn the sign-up bonus and then cancelling the account after a year or less — you might be denied future cards.
• Risky behavior: Risky financial behavior in the past could be a red flag and could prevent you from getting new credit.
• Broader economic and market trends: In times of economic recession, high inflation or other periods of economic instability, some banks might tighten their lending practices, making it harder to get approved for a new credit card.

What to do after you have been denied for credit

There are a few steps you may want to consider after being denied for new credit, including:

• Investigate: If you're denied for credit, read the letter with the denial reasons. When you are denied a line of credit, the lender is required to provide the reason(s) that led to their decision.
• Fix: If possible, resolve the issues that led to your denial. If you opened too many accounts in the past year, for instance, wait a few months before applying again; if your credit utilization ratio is too high, work to lower that before applying again.
• Research: There are dozens of credit card options available in the U.S., and they may offer different benefits to cardholders. It can be beneficial to research multiple options to find out which is the best card for you or if there are other options that might give you a higher chance of approval
• Reapply: Whether it's the same card or a new one, once you understand and address the reasons for your previous credit denial you may want to try again.

How to help prevent being denied in the future

Consider the common reasons for credit denial prior to applying for new credit in the future, and make sure that you're addressing those factors. If your credit utilization or debt-to-income ratio was listed as a factor, for instance, work on lowering them before applying again. If you need a better credit score or longer credit history, consider becoming an authorized user on a parent or trusted family member's credit card to help before reapplying for a card of your own. By addressing the specific reasons cited for your denial you can help increase your chances of approval in the future.

Bottom line

Before reapplying after being denied credit, address the reason(s) listed in your denial letter to help increase your chances of approval in the future. Whether that means choosing another card, reducing your debt, simply giving it more time or something else entirely, careful planning can help you get approved for your next card and help avoid additional rejections.