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5 reasons why your credit card application has been declined

5 reasons why your credit card application has been declined

If your credit card application has been denied, it is important to look into the reasons as to why that might be. This can help you to avoid applying for more credit cards and getting your application refused again. Read our guide to also find out what to do next.

Anelda Knoesen
From the Money team
minute read
posted 7 JANUARY 2020

Why have I been refused a credit card?

There could be a number of reasons as to why your credit card application has been declined:

1. Your outstanding credit balance is too high

If you already have several outstanding loans and balances on credit cards, you can be penalised for maxing out your credit or having high balances even if you’re making your repayments on time. This is because over extending credit can put consumers at risk.

Credit card providers want to see that you’re managing your credit effectively and that involves only using a portion of the credit that you have available.

It’s important to try to reduce your outstanding credit before you apply for more credit cards. Otherwise, credit card providers might see this as a sign that you’re struggling to manage your money.

2. Unstable work history/your work income is too low

Credit card providers can favour applicants have a stable job history, as your application can be accepted or declined on whether a lender is confident that you can keep up with your monthly repayments. Your application can also be rejected if your income is too low and providers aren’t confident that you can afford the repayments.  

However, as flexible working contracts and self-employment increases, lenders are updating their policies to accommodate this.

3. You have a limited credit history

To be accepted for credit, you have to show you can effectively manage it, which is harder to prove if you have a limited credit history. You need at least one account that requires credit, open for six months, to generate a credit score.

You can show credit lenders that you can effectively manage credit by managing your payments on your utility bills, an overdraft (including an overdraft on a student account) or even a phone contract. Once you’ve built up your credit file, you’re more likely to be accepted for a credit card in the future. A credit building card might be something to help you build your credit file.

4. Late payment charges

Late payments will also negatively impact your score. If you have made a payment within 90 days after the due date anytime within the past six months, it can increase the likelihood of your application being rejected as this can imply to lender that you’re less likely to pay on time in the future.

5. Too many applications for credit

Your application may have been rejected because you’ve made too many credit applications, also known as inquiries on your credit file. This can be seen by other credit card providers and can suggest you’re struggling to manage your finances effectively. In addition to over extending credit can put consumers at risk.

What happens after you get declined for a credit card?

If your credit card application has been declined, you might not be notified straight away. Unlike an immediate response when you’re accepted for a card, it can be 7-10 business days before you receive an adverse action letter. Your adverse action letter will be sent by the provider stating the reasons as to why your credit card application has been denied.

Will a credit card rejection affect my credit score?

If your credit card application is rejected, it can impact your credit score. When you apply for a card, lenders use your information to run a ‘hard’ search on your credit file, also known as a hard inquiry.  
If you’re concerned about having poor credit, you should think about applying for a credit-building card. If you’re accepted for one of these cards, you may be able to improve your credit score by making the repayments on time and showing you can manage your finances effectively.

How do I appeal against a credit card denial?

You can appeal against a credit card denial through a credit rating bureau, either online, by mail or over the phone. If your credit card application is denied, you have 60 days to request a free copy of the credit report used in the decision, to see if there are any errors on your credit file that can be disputed. Credit bureaus have 30 days to investigate and respond to your credit report dispute, or 45 days if you send additional proof during the investigation period.

How long should I wait to apply for credit card after being denied?

It depends on the reasons why your application was rejected, which will be outlined in your adverse action letter.

  • If your application was rejected because you’ve made too many inquiries on your credit file, then it’s best to wait between four and six months before applying again.
  • If you were rejected because of a low credit score, then you’ll need to wait until you’ve improve your credit worthiness – perhaps by improving your payment history and reducing any outstanding credit balances.
  • If you were rejected due to a low income or your employment status, then it’s best to wait until you’re in more stable employment.

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