In a world where credit cards are accepted everywhere and pre-approved credit card offers are run-of-the-mill, you may mistakenly view credit as a basic entitlement. But if you apply for a credit card only to receive a rejection letter a couple of weeks later, this experience will snap you back to reality.
Credit isn’t a basic right, but credit card companies do have the right to turn down your request if you don’t meet their minimum requirements. Although a rejection may hit hard and cause you to back away from credit, you shouldn’t give up easily. There is a reason for the rejection. And the sooner you understand this reason, the sooner you can correct the problem and qualify for a credit card.
Here are four steps to take after you’ve been turned down for a credit card.
1. Read your rejection letter carefully
The credit card company will send a letter that states the specific reason for rejecting your application within 10 days. Due to frustration, some people read the first two sentences of the rejection letter – just enough to know that they were denied – and then toss the letter aside. However, these letters state the specific reason(s) for denial, such as high debt utilization, negative items and insufficient personal income. You can’t fix your credit problem if you ignore the reason behind the rejection.
2. Request a free copy of your credit report
If a credit card company rejected your application due to credit-related issues like late payments or too many existing debts, you’re entitled to a free copy of your credit report to ensure the accuracy of information in your report. You can contact each of the three credit bureaus – Experian, TransUnion and Equifax – to request a free copy, or order your report from AnnualCreditReport.com.
Once your credit report arrives, meticulously comb each entry and check for inaccurate statements that could have triggered your rejection. For example, a creditor may have mistakenly reported a negative item on your report, or an unknown account may appear on your report. You have 60 days after a rejection to request a free credit report. Write the credit bureaus to dispute or request the remove of any inaccurate information.
3. Apply for a different type of credit card
No prior credit history can also trigger a credit card rejection, which is ironic since you need credit to build credit. When applying for first-time credit, you might submit an application for a major unsecured credit card issued by a large bank. But in all honesty, these creditors aren’t that accepting of newbies. They might give you a credit card, but it may not be the credit card you want.
If you’re turned down for an unsecured credit card due to lack of credit history, a secured credit card is your best bet. Other than the fact that a secured credit card requires a minimum security deposit between $300 and $500, they work just like traditional credit cards. You can use secured credit cards anywhere Visa and MasterCard are accepted, and in most cases your credit card issuer will report your account activity to the credit bureaus (call the issuer beforehand to make sure this is the case). This builds your credit history and creates future opportunities for an unsecured credit card.
But this isn’t your only option. While a secured credit card gives you access to credit with no prior credit history, there’s also the option of a retail store card. These types of credit cards require no security deposit, but have high interest rates and low credit limits. Plus, your shopping is limited to a single store. However, retail store cards feature relaxed credit requirements, thus a good choice for first time credit card applicants.
4. Repair your credit
Some people conveniently blame a credit card rejection on credit report errors or lack of credit history. But oftentimes, denials simply result from bad credit habits. Late payments, missed payments, high debts, collection accounts and credit judgments can kill your credit score and stop approvals.
Work on repairing your credit and hold off on future credit card applications until you’ve increased your credit score. Pay your bills on time every month. If necessary, enroll in automatic bill pay or set payment reminders. Develop a plan to pay down your existing balances, and contact old creditors to settle judgments and collection accounts.