If you have recently been turned down for a credit card or loan, it could be for a few common reasons:
- You may not have a credit history yet
- You have, in the last six years, paid bills late or did not pay a bill at all
- You currently have too much debt
- Your credit history is inaccurate
If you don’t have credit history
It’s a classic catch-22. You can’t get a credit account until you have a credit history; you can’t get a credit history until you get a credit account. If you have no credit history, try applying for a student credit card, asking your local bank or credit union for a credit card, or applying for a car loan with a cosigner.
If you have paid late or not at all
The number one reason for bad credit–and credit card application denials–is because you have paid a creditor late one or more times in the past few years. These late payments can stay on your credit history for up to seven years, and the more of them you have, the worse your credit gets. Focus on paying your current creditors on time, every time for the next six months. If you need a new credit account to build credit, try applying for a bad credit credit card. Just watch out, as the fees they charge can get expensive.
If you have a lot of debt
Sometimes your credit score can look good, but you are still turned down for new credit. Chances are your debt utilization is high. That means that you have a lot of debt in relation to your overall credit limits. Work on paying down those balances, and you should be able to get approved for new credit again. If you need help with your debt, consider a debt management program.
If your credit history is inaccurate
If you believe you have good credit and are turned down for credit, you may be the victim of identity theft or a simple error on your credit report. While identity theft is less common than some TV ads make you think, it does happen. Simple errors on credit files are more common. Errors can be fixed by writing letters to the credit bureaus. The first step, however, is to get a copy of your credit report and ensure that all information is accurate.
We’ve broken down the essentials of credit and how it works into a few easy articles. Take five minutes to learn everything you need to know about this powerful financial tool: your credit.
- What is a credit score and credit report?
- How is my credit score and credit report used?
- How do I get good credit?
- Why do I have bad credit?
- What credit score do I need for a new credit card?
- How do I know what my credit score is?
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