You’ve worked hard to improve your credit score and it’s great. So why did you get turned down for a new line of credit or loan? Credit scores are on the rise and more people than ever have impressive credit scores. But your score alone isn’t always enough to get a “yes” from a creditor or lender. To get the best interest rates on loans, financing and credit cards, you’ll definitely need a good credit score. But here’s a look at when that’s not quite enough and why you can be turned down for credit you want.
#1 Failure to Meet Internal Requirements
Every credit card issuer and lender have different requirements for different products. If you knew exactly what those requirements were, you would only apply for credit for which you knew you’d be approved. You can check out blogs and use apps that recommend products for which you will qualify based on your credit score, but that’s not always a guarantee of success either.
Your score isn’t necessarily the score the lender or creditor sees. When you get a Vantage Score from your credit card company or even a FICO score you purchase, it’s not the same as the credit score the lender will see if they calculate your score based on their criteria or purchase a commercial score. If the score you think you have a is a few points lower than their threshold, you might not qualify.
#2 Debt-to-Income Ratio
How much money you make doesn’t affect your credit score. All that matters is that you make regular payments, don’t pay late, and don’t max out credit lines. But when you’re borrowing money to purchase an asset, such as a mortgage or car loan – or apply for a credit card with a significant line of credit, your income definitely matters. Creditors look at your debt versus your income.
If their calculations show that you’re not able to support more debt based on your income, you can be refused. Sometimes, a financial product with a certain credit limit or loan based might require a minimum income level, or a specific debt to income ratio to issue an approval. If the lender thinks your income can’t handle the debt, they can view you as a bad risk, despite a good credit score.
#3 Negative Entries on Your Credit
Foreclosure, bankruptcy, liens, judgments, and garnishments are all negative items that can lower your credit score when they occur. Over time, the impact of these events on your credit score grows smaller and smaller. Eventually, they may have very little effect on your credit score at all so long as you’ve worked hard to rebuild your score and have no other negative items.
However, for some creditors, these negative items will trigger a “no” despite a healthy credit score. Some credit card issuers won’t work with people that have filed bankruptcy or gone through a foreclosure. Some won’t work with consumers that have an open judgment or garnishment on their credit report. You can dispute the item, pay it off, or apply with a creditor that doesn’t care.
#4 Opening and Closing Accounts
If you’re one of those savvy consumers that tries to take advantage of all the best rewards cards, good for you. However, trying to beat the credit card companies at their own game can get you turned down. The average person opens a credit card account, takes advantage of a rewards program, and keeps the card. Others will open an account, score the max rewards possible, then close the account.
You can have a good credit score, but your credit behavior might trigger a refusal from a card issuer if they think you will not be a loyal customer and are only looking to take advantage. Just as it’s your right to open and close accounts as you want and reap the rewards, where possible, it’s the credit card company’s right to refuse you access to their products because you’re gaming the system.
If you’ve been turned down for a financial product, it might not be obvious why it happened. Creditors required to send you notice of why you were refused, but these notices may or may not reflect the true reason behind the refusal. It’s up to you to stay on top of your credit report, watch for negative items, clear up errors, and apply for credit wisely and conservatively.
To find out more about improving your credit score, check out Credit Score Keys today.