Responsible people with excellent credit scores are often shocked after applying for a new credit card---and getting rejected. It's more common than you think, so it pays to learn why a good credit score may not be enough.

It’s bound to happen to all of us at one time or another—you go to apply for a new credit card (or an auto loan, mortgage, or any other line of credit) and, out of nowhere, they turn you down.

Application declined.

You’re shocked. Angry. And—if you know that you have a fairly good credit score—flabbergasted.

“But I have good credit,” you shout. “How can you reject my application?”

A good credit score isn’t everything

If you are a regular reader of this blog or others like it, you probably have a (healthy) obsession with your finances — including your credit health. You check your credit reports at least once a year and perhaps use a free monitoring tool to track your credit score. (Learn how to check your credit score for free now if you haven’t recently.)

We’ve been taught to get this number into the 700s or beyond so that we always qualify for the best interest rates.

Although it’s true that it’s important to have a good credit score, your score is just one of many factors a bank will use in deciding to extend you credit.

Understand the underwriting process

When you apply for credit, whether it’s a credit card with a $3,000 limit or a mortgage for a $300,000 home, your application begins the process called underwriting.

Underwriting is how the bank decides whether to take on the risk of lending you money. Parts of the underwriting process are to comply with laws governing how the bank can lend money, and other parts are to protect the banks’ own interests and ensure the loan is profitable.

In some ways, the stakes for a credit card application are lower than on a big mortgage. The bank puts a lot less money on the line.

But in one respect, credit cards are actually risky for banks. That’s because a credit card is an unsecured debt. A mortgage, on the other hand, is secured. If you don’t pay, the bank can foreclose and take possession of an asset (your house).

If you don’t pay your credit card bill, the bank can send collectors after you all day long, but they can’t come in and take property to cover their loss.

Every credit card company has different underwriting criteria. This is why you can get approved for some credit cards but be turned down for others.

Though their decision-making process is a trade secret, we know generally what they want to see on your report:

No recent late payments or collections activity

Missing a single credit card payment or forgetting about a medical bill that ultimately ends up going to collections isn’t the end of the world. Such a slip might reduce your credit score by 10 or 20 points for a year or two, but it won’t take you from 750 to 500 overnight.

It might, however, prevent you from getting new credit. If you have “potentially negative items” on your credit report like late payments or collections accounts, this could cause you to be denied a new credit card.

Related: Behind on bills? How to catch up.

A low debt utilization ratio

Your debt utilization ratio is the total of your monthly outstanding credit card balances divided by your total credit limit.

Your utilization ratio is calculated using your statement balances—even if you pay the card in full each month.

Lower is better. If your ratio is 50% or higher, it will definitely raise flags in underwriting because it is a common predictor of people who are close to “maxing out” their credit cards.

So if you just have one credit card with a $3,000 limit and regularly spend $2,000, watch out—your utilization ratio is in the danger zone even though you don’t carry a balance. To solve this, you can pay your credit card balance down before the billing cycle ends.

Adequate employment and income

Banks look at your likelihood of repaying a loan based on past behavior (your credit score) and also your ability to repay the loan now (based on income). You’ll be asked to list your annual income and employer. For a larger loan, the bank will verify this data. They may not for a credit card, but don’t expect to be approved for a $10,000 limit card if your annual income is only $20,000.

A long credit history

This is where, despite your best efforts to build good credit, being young works against you. The longer you have been making timely monthly payments on loans and credit cards, the more banks trust that you’re creditworthy.

Building this track record takes years. Your credit age is determined not only by when you opened your first credit account but the average age of all your credit accounts. So whenever you get a new loan or credit card, it reduces the average age of your credit lines.

Although there’s not much you can do about this one except make your timely payments and wait, it’s a reminder that this could be a reason you’re declined on a credit application despite having a good credit score.

Related: How to build credit for the first time

No “credit hungry” behavior

Someone who is eager for more credit—what I describe as being credit hungry—will likely apply for any credit card offer they see. Each time you apply for credit, it creates what’s called a hard inquiry or “hard pull” on your credit report.

Credit bureaus typically look back at the last two years and begin to dock points off your credit score if you have more than one or two hard inquiries. If you have more than a few—especially in the span of just a few months—it indicates that you’re credit hungry and it’s a common reason your credit card application might be denied.

Now, some people do this to exploit signup bonuses and wrack up tons of frequent flyer miles, but most people who are credit hungry are applying because their financial life is a mess and they need credit to stay afloat.

Apply for the right cards!

Understanding what the credit card companies are looking for is one way to help increase your chances of approval for the cards you apply for. Another way is to simply apply for credit cards that have a reputation for giving approval more easily.

When you are in the credit card industry, you can recognize brands that are more generous and flexible about taking a chance with you.

Money Under 30 has done extensive research into finding the cards most approved by issuers.

Here are a few credit cards that, assuming you have the right credit score within that category, will more likely than not stamp your application approved:

Good credit cards with easy approval

Disclaimer – The information about the Wells Fargo Cash Wise Visa card has been collected independently by MoneyUnder30.com. The card details have not been reviewed or approved by the card issuer.

For people with good credit, the highest performing card by this metric is the Wells Fargo Cash Wise Visa® card.

This credit card requires good credit, and as long as you have good credit, you will most likely get approved. If you do, you’ll get great benefits like 1.5% cash back on all purchases without any limits or categories, a juicy $150 signup bonus when you spend $500 in the first three months, and 1.8% cash back rewards on qualified digital wallet payments.

Credit cards with good approval rates even with low credit scores

For people with lower credit, things get a bit more complex. Fortunately, there are still plenty of credit cards that you can apply and be approved for even with poor credit scores.

If this is you, you’d do well to apply for the Secured Mastercard® from Capital One.

This credit card is ideal if your credit score isn’t sterling. You won’t get the exciting benefits or perks that you get from a card like the Wells Fargo Cash Wise Visa® card, but there is a high likelihood you’ll get approved (which is something you aren’t likely to see from a more benefit-laden card).

Additionally, the Capital One Platinum Credit Card boasts a number of really unique benefits relative to the credit level required to get it. Most importantly, it has no annual fee, and it offers a relatively high line of credit which is automatically reviewed after six months of on-time payments.

Secured Mastercard® from Capital One

In A Nutshell

Owning a secured credit card can be a necessary step in bring your credit profile out of the gutter and the Secured Mastercard® from Capital One is one of the strongest secured credit cards on the market today. It’s rare to find one that doesn’t charge an annual fee and Capital One will automatically review your credit limit in as little as six months.

Read review

In A Nutshell

Owning a secured credit card can be a necessary step in bring your credit profile out of the gutter and the Secured Mastercard® from Capital One is one of the strongest secured credit cards on the market today. It’s rare to find one that doesn’t charge an annual fee and Capital One will automatically review your credit limit in as little as six months.

Read review
Credit Score Requirements: Credit Score requirements are based on Money Under 30’s own research of approval rates; meeting the minimum score will give you the best chance to be approved for the credit card of your choice. If you don’t know your credit score, use our free credit score estimator tool to get a better idea of which cards you’ll qualify for. *Money Under 30 uses a FICO 8 score, which is one of many different types of credit scores. *A creditor may use a different score when deciding whether to approve you for credit. ?
  • Poor
Poor 500-599
Fair 600-699
Good 700-749
Excellent 750-850

What We Like:

  • Start off with an initial credit line of $200 w/ a minimum deposit of $49, $99 or $200

  • Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed

  • No annual fee and no foreign transaction fees

Learn More >>

Summary

That wraps up some common reasons you might be declined for a new credit card even though you’ve got good credit. It’s frustrating, but a credit app decline isn’t the end of the world.

After you’re declined, you’ll get a letter or an email stating some vague reasons your application was rejected. These can seem cryptic, but hopefully this article sheds some light on what the bank was thinking so you can continue to improve your credit and have better luck next time.

Read more

Getting rejected by a credit card company isn’t personal—they’re just running numbers and for some reason you don’t match their profile. Use our resources to learn more about your credit, or find another card you want to apply for:

Editor’s note: This article was originally published in May 2014. It has been thoroughly updated for relevance and accuracy before republication.

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About the author

David Weliver
Total Articles: 353
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.

Article comments

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15 comments
Laura Sharp says:

Thank you for trying to help me out. Who would have thought not enough credit would be a bad thing. I didn’t apply for a credit card.. what bothers me is someone did! Any info on what I need to do it would be appreciated.

G Man says:

Wells Fargo? I think not. I had an 824 and 821 score. I was still rejected as I didn’t use enough of my credit. I had five open cards with almost no balance. They told me I didn’t use my cards enough and I didn’t need another card. in other words I didn’t use my cards and companies weren’t making money off of excessive interest charges…

Selina Robbins says:

Thanks for the info! I almost made a mistake by applying for a credit card today, probably would’ve been denied but I don’t want to apply if it means I’ll have “hard inquiries”. My credit isn’t that good but I want to make it better. If I pay off old debts, will that increase my credit score? If I check my credit score on Credit Karma, will it make my score lower? Do unpaid hospital Bill’s make my credit score lower? Thanks again for the great article! I will definitely be reading more of the information you have here! Thank you for your time.

Sarah says:

In March 2020, I decided to clean up my credit. I had no cc’s, I had just had un-paid bills. I called all the companies and settled for deletion. I started at 544 and now I am at 752. You should pay them.

Robin says:

Well said, Good info. There is no doubt that for a new business setup, most of the people take business loan but some people’s loan application is rejected by the banks and lots of people don’t know what the reasons behind are. But thanks for the post, it’s really informative for those people which are need business loan.

Richard Barreras Sr says:

I have a credit score of 820 have no outstanding bills other than a $875 credit card bill that I pay in full each month. No other bills. I did receive a alert from a merchant saying their system was hack and to be aware that my information may have been compromised. I did put a security alert on all reporting agencies. I applied for a credit card at Home Depot and was turned down. Reasons given by Home Depot: 1 Unable to verify identity information, 2 Unable to verify credit reference do to security alert. Does this mean that my credit has been locked or something?
Richard

Sam says:

Yes. If you have alerted companies of a security alert and haven’t reversed that alert. Denial is what you would want. Aka , someone not being able to start a card in your name and rob you.
I would contact the bank that supplies Home Depot cards and explain your situation. A denial can be reversed by the issuing card company. (If they choose)

Sande Brown says:

I am a retired Federal Employee, I spend most of the time living in the USVI, but return to NJ every
summer. I only fly JetBlue, I have excellent credit,I have 1 major credit Card with Pen Fed, not a very high limit, only $5,000. They give me a raise if I ask for it, I want a Barclays card to get more Travel Point, my main address for my bank is in NJ, But they refuse to give me a card because I spend alot of time outside the upper48, but they will give a card to a resident of the Domincan Republic! Is This legal?

Ray says:

I am middle aged with excellent credit (815 score) , decent income, own home with no mortgage, pay all credit cards off in full monthly, have sizeable net worth and was denied by Capital One for their Venture Card. First time ever and last time I’ll ever apply to them but I wonder what rule kicked me out? Age maybe?

frank sparacino says:

We are much like you, except we have a mortgage in EXCELLENT standing which doesn’t help in cc situations. To cc co. Paying off ur bills = NO REVOLVING CREDIT… in other words they think u can’t manage monthly payments! After, the 2008 recession we paid off any cc & swore off them. But very y recently wanted to take advantage of cash back via cc. The only debt I that shows up is r mortgage, but that’s an INSTALLMENT LOAN, not revolving credit! I was denied by SOFI (in which I own $200k in stock!) & DISCOVER who’s supposed to be ez to get. Both for the same reasons. They don’t even back up their statements for denial, yet do a HARD CREDIT PULL. The denials will lower my score @16 pts. NOW, I REMEMBER WHY WE GOT RID OF OUR CC!
I’m going to call my brokerage co. & maybe a bank in which I have a LOC paid monthly for 24 yrs.
Hard to have faith in any of them! GLTA!

mark says:

new laws are coming very soon to benefit the people, so keep your eyes and ears open for this…more tuffer penaltys will be put on collection companys who change dates the collection opened, price changes and the name of the collection company changes to keep reposting the collection…watch those dates big time!!! dispute any wrong information you see right away, if it continues write the collection companys and hire a lawyer…

DJ says:

Hello,
I was recently denied credit for the Bank of America Travel Rewards Visa. There were 2 accounts removed as a result of my disputing them on EXPERIAN(bureau stated in denial later). However, I was premature in sending a letter to BATR VISA to be reevaluated since 1 was updated immediately over the phone and the other was pending removal. When I returned home from a week vacation, I received a letter which stated that my request to be re-evaluated was still a denial for reasons as follows:

1) I NEED TO DISPUTE THOSE NEGATIVELY REPORTED ITEMS ON TRANSUNION AND EQUIFAX
2)MY PERSONAL BANK OF AMERICA ACCOUNT HAD A NEGATIVE BALANCE RECENTLY

Point 2 was not even mentioned in my first denial letter. Furthermore, I have zero late payments(151 payments out 151 payments on time). I am learning that there are a lot of factors that could affect credit decisions.

Rat says:

The whole idea and process of issuing credit card based on all these factors seems to be messed up

Mary Loe says:

I was told no credit file with a good score and income, I have a credit file so I don’t understand it.

I believe you may be mixing underwriting criteria together in a manner that is not correct.

Points 1,2,3, and 5 are commonly used factors in risk scores. If a borrower showed poorly in one or more of these categories, it is unlikely that they would have an “excellent score”. More likely they would have a mediocre or poor score, and there should be no surprises when denied credit.

Point 4 is not part of any credit report or scoring algorithm. Underwriters will sometimes but not always consider employment and income in conjunction with a risk score.

For example, I recently leased a new car. The finance company approved the lease on the spot without any further investigation because my credit score was above their predetermined threshold. If the score were lower, they might have asked about employment and income. On the other hand if I were applying for a mortgage, they would have asked about employment and income no matter what the credit score.