With all those credit card offers that come in the mail, you might think you can have your pick of credit cards.
Don't count on it. Just about anyone with a pulse is getting those notices that they have been “pre-qualified” for a credit card. The truth is, neither you nor anyone else has been pre-qualified.
You may be getting these offers for any number of reasons; the zip code in which you reside, the model car you drive, other credit or charge cards you might have.
But the credit card company can't offer you an actual credit card yet because it hasn't had a peek at your credit file. Once it has, it might not be returning your phone calls.
Consumers often take it personally when they apply for a “pre-qualified” credit card, only to be turned down. But something ugly in your credit report is not the only reason a credit card company declines your application.
What other reasons are there? We asked the National Foundation for Credit Counseling (NFCC) and they came up with 10.
Not enough credit
You need credit to get credit, it seems. It's like getting turned down for your first job because you don't have work experience. Credit card lenders believe in patterns.
They want to see how you've handled other credit. You can build your case by getting a retail store charge card, using it to make a small purchase, then paying the bill immediately.
Poor pay history
Been late on a few bills? Word has a way of getting around and ending up in your credit file, which lowers your credit score.
You can raise your score by paying all of your bills on time, every time. It's as simple as that.
If you have a credit card or two and they're maxed out, it looks like you're in over your head. It doesn't exactly inspire a credit card company to extend you more credit.
NFCC says your credit card debt should equal no more that 30% of your available credit.
Too much debt
Mortgage, car payment, credit card bills – it can add up to a lot of money. If it looks like too much money, relative to your income, it can raise a red flag. Do you really need to take on more debt? Maybe the credit card company is doing you a favor by declining your application.
Too many inquiries
Every time you apply for credit, the potential lender pings your credit file. The credit bureaus keep track of these inquiries, which themselves become part of the record.
What's a credit card lender to think if you've applied for 3 other cards in the last month? They probably think you may have a financial problem.
There could be something in your credit report that that's an instant turn off. And the trouble is, the worse the problem – unpaid tax lien or Chapter 7 bankruptcy – the longer it lingers in your file.
In some cases, a credit card company might not think you make enough money. The credit card you're applying for might have a $10,000 credit limit and the lender decides your income isn't high enough to risk it.
A very common reason for rejection is job status. If you've just switched jobs, a lender is likely to wait to see how it works out. If you've moved from job to job in a short time, it might also be a reason to say no.
You might be considered too young. That's often the case when teenagers apply for their first credit card. Being a signer on a parent's account might be a good first credit card, while helping to establish your creditworthiness.
Finally, there might simply be an error in your credit application. Maybe you gave the wrong information or left something out.
Filling out the form online might be a way to cut down on mistakes since online forms prompt you when you leave out important information.
Remember, if you are denied credit because of something in your credit report, the Fair Credit Reporting Act gives you the right to be notified of the reason. If the information is in error, you can then appeal to the three credit reporting agencies – Experian, Equifax and Trans Union, to remove the incorrect information.