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Why Could My Credit Card Application Be Refused?

Aug 17, 2007
Many people have questions when they apply for a credit card - which is the best for me? How do they decide to give me a credit card? Why do they need to know all these things about me? What does it mean to be pre-approved? What could make the card company decide not to give me a credit card?

It's not all that mysterious a process. Companies make their decisions based on your credit score, which is derived from your credit report and other information that they may have about you. Your credit record is maintained by reporting bureaus - the Big Three are Equifax, Experian and CallCredit. Each maintains a separate credit history, and as a general rule, they don't share information with each other. Your credit file may contain may details like:

- People on the electoral register at your address
- Details of late payments or defaults on any loans
- CCJs and bankruptcy orders against you
- All your applications for credit
- Other people who share your address

The credit reference agency does no more than supply the information on your credit history. When you apply for a credit card, the company that will issue that card takes your credit report and feeds the information in it into a set of algorithms - mathematical equations - that compare your information with the information about a fictitious 'ideal customer'. That customer has certain traits - a particular wage, a certain number of credit cards, a particular marital status, own a home or rent one, be living there for a certain number of years. The closer your own traits are to that ideal, the higher your credit rating or score will be. The higher your credit rating, the more credit card companies would be pleased to have you as a customer.

Before you apply, it's to your benefit to shop around for the best credit card for you. It is NOT to your benefit to just apply willy-nilly to any credit card offer that strikes your fancy. It's really not true that 'the worst that can happen is they'll say no.' There's another, not-so-obvious consequence to credit card rejections. You might have noticed that one of the things that appears in your credit report is a list of your applications for credit. If that list is too long, it will be a negative mark in your credit score, making it harder for you to get the credit card you want. That's why it's important to shop around before applying - and the best is one that is almost certain to approve your application.

Some reasons your application may be turned down:

- You've applied for a card that targets people with higher credit scores.
Most companies that issue credit cards have a variety of them - they call them 'credit products' - each aimed at a different market. A reward credit card, for instance, often targets those with the best credit scores. At a credit card comparison site you can check each credit card offer to see if it is aimed at those with excellent, good, fair, poor or bad credit, and apply for the one that best applies to you.
- You don't have any credit history.
Believe it or not, never having borrowed money before can work against you when you apply for a credit card. If you have no history of having paid bills, then the company has no way of judging whether or not you'll pay their account.

- You've not been in your current job or residence long enough.
One of the pieces of your credit score puzzle is how stable you are, and that's judged by how long you've been in your current residence or position. If it's less than two years, it will be a negative, even if there's a good reason for it.

- You've applied for too many other credit cards and loans.
This is one reason to be sure you only apply for the best credit card - the one that you're most likely to be approved for. If you've applied for many credit cards in a six to twelve month period, the credit card companies may see it as a sign that you may be in financial trouble.
About the Author
Jon Francis has been involved with finance for many years! With an in-depth knowledge of the credit card UK market help helps others get the best from a credit card.
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