Just because you have good credit doesn’t mean you’re guaranteed to be approved for all credit cards. It may seem counterintuitive and maybe even insulting to be rejected, but card issuers consider more than just those precious three numbers of a credit score.
On the other hand, that’s also why you might be pleasantly surprised if you’re doubtful about your chances but end up qualifying for a card.
Here are possible reasons why a credit card application could result in an unexpected rejection — or approval.
It’s not all about credit scores
Credit card issuers will never reveal exactly how they determine whether to approve an application. Those so-called underwriting standards are top-secret, and they vary by issuer.
Credit scores are usually important for approval, since they summarize your track record with borrowed money. So a limited credit history, late or missed payments or a recent bankruptcy are all factors that can affect your credit scores and your ability to get approved for a credit card.
A trickier part of credit score formulas is your so-called credit utilization ratio. That measures how much of your available credit you’re using. Issuers like to see you with lots of credit available but using little of it, like less than 30%.
But your credit isn’t the only factor.
Other financial factors that issuers might consider include:
Income. Federal law allows lenders to extend credit only when they believe the borrower has the ability to repay it. The income you report on your credit card application is one way creditors decide how much, if any, credit they should extend. They might look at not only the income figure but also how stable your income has been.
Debt. One of the most common reasons people are rejected for a credit card — even people with good credit — is a high debt-to-income ratio.
Age. If you’re under 21, you’ll face income requirements mandated by the federal government.
Too eager for credit. A card issuer can decline your application if it believes you have too many inquiries or even too many credit cards already. That said, having multiple credit cards generally helps your credit utilization if you keep the balances low.
You’re not the target customer
Card issuers have business goals for each of their cards. They target the type of customer they hope to attract. You might not fit that profile.
As a fictitious example, say an issuer wanted to attract more customers who are likely to carry a monthly balance, since such cardholders — known as “revolvers” — rack up interest charges. You, on the other hand, might be a “transactor” who pays off your balances in full every month. That’s a great habit that probably improves your financial life. But the issuer’s approval formula might assume that people with great credit are less likely to carry a balance. So, it’s a mismatch, and you get rejected.
By the same token, an issuer might approve an applicant with middling credit if that person seems like a good fit.
Can they do that? Can they reject you because your credit is too good?
Generally, you don’t have a right to be approved for credit — including a credit card. However, you can’t be rejected based on legally protected characteristics, such as race, sex or religion, according to the federal Equal Credit Opportunity Act.
Some issuers have policies they adhere to regardless of an applicant’s credit. They could be reasons for automatic rejection. Examples are:
Chase’s 5/24 rule. Chase has a restriction involving applicants who open five credit cards — from any issuer — within a 24 month period. When you apply for a Chase card, Chase counts that application as one of your five allowed approvals. So if you’ve already opened more than four card accounts within the preceding 24 months, your application won’t get approved.
American Express’s bonus rule. With some cards, AmEx limits eligibility for a “welcome offer” to once in a lifetime for a particular type of card. In this case, you’re not getting rejected for the card altogether, but for the new-cardholder offer. But it’s another example of an issuer-specific rule.
You don’t have good enough credit after all
You can be forgiven if you don’t fully understand the credit scoring system in the U.S. It’s complicated. But it also means you might be mistaken about how good — or bad — your credit is.
For example, on a scale of 850, a credit score of 680 might seem great. That seems like your score is a solid 80% of the maximum. That’s a B-student in school.
But credit score scales generally go from 300 to 850. So, 680 is generously referred to as only “fair,” which, in truth, is below average. It will hurt your chances of being approved for the most lucrative credit cards, like travel cards with big sign-up bonuses.
Or, maybe you placed a security freeze on your credit reports to protect yourself from identity theft but forgot to unfreeze it for this application?
If you think your rejection is because of an error, you could ask the card issuer for reconsideration.
It’s just business
Remember that approval or rejection for a credit card is a business decision by the issuer. It’s not personal. Both parties have to agree to do business with each other. If you get denied, the issuer is just saying you’re not a good business fit for them with that particular card.
Fortunately, you can choose among many other credit cards that have different approval rules.