“Why can't I get a credit card?” If you're asking this, you're probably feeling frustrated and confused. Getting denied (for anything!) is unpleasant enough, but it's even worse when you don't know why.
There are several possible reasons for a rejection, and understanding them can help you improve your chances of getting approved next time. After all, a credit card can be an important financial tool for managing your budget.
In this article, we’ll explore some of the most common reasons why you might not be able to get a credit card and guide you through some actionable steps to solve this problem.
Why can't I get a credit card? 10 possible reasons
Credit card issuers (the companies that offer the cards) consider a few key factors when reviewing your application. Here are some of the most common reasons why applying for a credit card can result in a denial.
1. Low credit score
Credit card issuers rely heavily on your credit score to assess your creditworthiness. It’s basically a way for them to evaluate how likely you are to repay borrowed money. A low credit score indicates higher risk and can result in denial.
Your credit score reflects your history of making payments on time, the amount of debt you have, and other factors. If your score is low, it may be because you've missed payments, have a high credit utilization ratio, or have other negative marks on your credit report.
2. Limited credit history
Without a substantial credit history, card issuers may not have enough information to determine your reliability as a borrower. If you're just starting out and haven't had many (or any) credit accounts, it can be challenging to get approved for a credit card, especially from traditional banks. Building credit takes time, and having a limited history doesn't give lenders much to work with when deciding whether to approve your application.
3. High credit utilization ratio
Ever feel like you're constantly maxed out on your credit card? This can be a problem. The credit utilization ratio compares your credit card balances to your total credit limits. A high ratio (usually above 30%) might signal to issuers that you're overextended on credit and a risky borrower. Keeping your credit card balances under control is key.
4. Too many recent credit requests
Applying for multiple cards in a short period can trigger inquiries on your credit report, which can temporarily lower your score. It's best to be strategic: only apply for cards you realistically qualify for, space out your credit applications, and focus on improving your credit profile before applying again.
5. Existing debt levels
If you're already juggling a lot of debt, like student loans or car payments, lenders might be cautious about approving you for even more credit. It shows you have a lot of financial obligations, and they might worry about your ability to manage another credit line.
6. Low income
Your income level is a critical factor in determining your ability to repay credit card debt. Insufficient income can lead to denial, as credit card issuers need to ensure you have a steady income stream to meet your financial obligations. Be sure to report all sources of income on your application.
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7. Employment status
Being unemployed or having an unstable job situation can impact your ability to get approved for a credit card. Lenders look for steady employment as an indicator of reliable income, so a stable job history can improve your chances of approval.
8. Errors on your credit report
Mistakes happen, and sometimes your credit report can have inaccurate information. These errors can unfairly lower your credit score and lead to application denials.
Regularly check your credit report for errors and dispute any inaccuracies with a credit bureau to ensure your report accurately reflects your financial history. (And, of course, make sure your application forms are filled out accurately, too!)
9. Lack of collateral for a secured credit card
Secured credit cards are a great way to build credit history, but they require a security deposit as collateral. This deposit acts as a safeguard for the issuer in case you default on your payments. If you don’t have enough funds to meet this requirement, your application for a secured credit card might be denied.
10. Age restrictions
If you're under 18, you typically can’t get a credit card on your own due to age-related regulations and requirements. Minors usually need a co-signer or need to be added as an authorized user on a parent or guardian’s account to have access to credit.
What to do if you keep getting denied for a credit card
By understanding why you’re being denied and taking proactive measures, you can work toward a more favorable outcome. Here are some strategies to consider:
Check your credit report and dispute errors
Your credit report is a vital document that lenders use to assess your creditworthiness. It contains information about your credit history, including past loans, credit card balances, and payment history. Experts recommend that you generate a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year.
Carefully review your report for any errors or inaccuracies. If you find any mistakes, dispute them with the credit bureau and the creditor who reported the information. Fixing these errors can improve your credit score and increase your chances of approval.
Pay down existing debt
High levels of existing debt can be a significant barrier to getting approved for a new credit card. Focus on paying down your existing debts, like credit cards or personal loans. This will not only improve your credit utilization ratio (remember, that's the ratio of your credit card balances to your credit limits) but also show your responsible financial management to potential lenders. By taking control of your existing debt, you'll be in a stronger position to qualify for a credit card in the future.
Apply for a secured credit card
If traditional credit cards continue to be out of reach, a secured credit card might be a viable option. Secured cards require a cash deposit as collateral against the credit limit. By using a secured card responsibly—making timely payments and keeping balances low—you can gradually build a positive credit history and eventually qualify for an unsecured credit card with better rewards and benefits.
Become an authorized user
Another strategy to improve your credit standing is to have someone add you as an authorized user on their credit card account. This person should be someone you trust and who has a positive credit history. As an authorized user, you inherit the account holder’s credit history on that specific card, potentially boosting your credit score if the primary cardholder keeps good credit habits.
Improve your income stability
Income instability can lead to rejections. To enhance your chances of approval, try increasing your income with side hustles, freelancing, or landing a better-paying job. (Find those opportunities here on The Muse, hi!)
Remember, though, that building a strong credit history takes time and responsible financial management. Don't rush into anything and focus on making sustainable improvements to your financial situation.
Build credit with alternative methods
If traditional credit cards aren't an immediate option, consider leveraging credit-building tools designed to establish or improve your credit history, such as credit-builder loans. These loans are structured to help you build credit. Instead of receiving the loan proceeds upfront, you make payments into a savings account or Certificate of Deposit (CD). Once the loan is paid off, you receive the funds and have established a positive payment history.
Bottom line
Now that you know the many answers to the question “Why can't I get approved for a credit card?”, you can start working on solutions. Whether it's due to a low credit score, limited credit history, high debt levels, or other factors, each denial provides an opportunity to improve your financial standing.
Building good credit takes time and effort, but with persistence and smart financial management, you can increase your chances of securing a credit card in the future and achieving your financial goals.