Denied for a Credit Card with a High Credit Score? Here’s Why.

Sometimes I hear from people who have been rejected for a credit card or other loan despite having a high credit score. The ones who feel the most frustrated are people who know someone else that got approved for the same card with a lower credit score. How can that be? Why would a credit card company turn down a person with better credit and approve someone with lower credit?

There are four possible reasons (or at least four that we consider the most likely):

#1. Not Enough Credit History

It’s very possible to get your credit score up into the 700s even with very little experience in actually using credit. (This is especially true if you’ve been an authorized user on someone else’s credit card.) But many credit card companies treat “newbies” differently than people who have longer track records of paying credit card bills, auto loans, etc.

So, yes, you might have a higher credit score than an older family member (for example), but their longer credit history of on-time payments and no defaults could still make them more attractive to card issuers.

Some credit card lenders won’t even consider you for their cards until you’ve built up at least a year of credit history with a different lender. And in reality you might need five years from the first credit card or loan you open before a card issuer really feels that they can “trust” your credit score as a signal that you are low risk.

#2. Too Much Credit or Too Much Recent Credit

It’s possible to build gobs and gobs of available credit over time, have a great credit score, and always be approved for new credit. Sometimes, though, all that credit will make you look risky. The red flags usually go up at the credit card companies if either of the following is true:

  • You have a history of getting new credit only to earn signup bonuses and then never use the card again.
  • You accumulate a lot of new credit all at once.

In the first case, your history of “churning” through credit cards can come back to bite you. Credit card companies are looking for loyalty, not customers who take the benefits and then vamoose. If you are going to be an unprofitable customer who moves on at the first opportunity, don’t be surprised when you and your excellent credit score get rejected.

In the second case, accumulating lots of credit all at once makes it look like you either have a major financial problem and need the credit to fall back on, or you are a criminal who is about to run up all those credit cards and skip town, never to be seen again. In either case, the credit card issuer sees you as someone who could cost them money, even if your credit score suggests otherwise.

#3. Not Enough Income

Even if your credit score is great, you might not make enough money for some credit cards. There’s nothing “wrong” with you or your credit history, but certain issuers may be looking for a certain type of customer, especially for high-end credit cards with lots of benefits. If your income does not reach whatever level they are seeking — or if you have a history of a low volume of card purchases — you could be rejected.

Credit card companies make money not only from interest charged to customers but also from fees that merchants pay them every time a card is used. If you have low income and/or low usage, they might see you as undesirable — even with your high credit score.

#4. Too Much Debt

It’s completely possible to build up a good credit score while accumulating debt. If you continually pay your bills on time while spending more than you pay back, you will go further and further into debt while getting goodwill for on-time payments. After all, payment history is the Number One factor in determining your credit score, so if you only make minimum payments, your score may still increase.

However, when your debt reaches a certain level and you apply for new credit, a card issuer may look at your debt and say “No way.” Sure your credit score is good, but to that credit card company your debt makes you look like a bomb about to explode — and they’d rather not be the ones hurt when your financial world falls apart.

(Also, that debt will eventually hurt your credit utilization ratio, which is the amount of your card balances as a percentage of your total credit limits. This is an important part of your credit score, and too much debt will pull your score down over time.)

Things Can Change

What a credit card company wants from applicants can also change from one period of time to the next. If the overall economy is good and the card issuer is doing well, more customers will be approved. If the economy is shaky and/or the issuers’ own profits have been shaky, they might pull back and approve fewer customers. You have no control over that.

Credit Card Companies Want Money

Bottom line: credit card issuers want to make a profit. If your history suggests you won’t bring that profit — either from too much debt, too many cards, or too little income — they can and will reject you, regardless of how good your credit score is.

Credit Scores Are Still Important

Nothing written here changes the fact that keeping your credit score at a high level should be a goal. It is simply to say that a high credit score alone is not a guarantee of anything. All other things being equal, however, having a higher score is always better than having a lower score.

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