You’ve paid your bills on time, are responsible with your savings, and have diverse types of credit, all leading to a credit score you’d proudly frame between your diploma and picture of your family.
Armed with a strong credit score, you try to take out another credit card and you’re…denied?
It can happen. A good credit score doesn’t make you immune to ‘no’ from lenders, even if its peaked at 850 (the highest achievable FICO-based credit score).
A lot of people are caught off guard because they assume a lofty FICO score is the golden ticket to unlimited credit. But there are several reasons you can be declined for a credit card even with an admirable credit score:
Past credit mishaps
If you have some serious credit now but that wasn’t always the case, you may still be declined a credit card from that same card issuer or lender, no matter what you do.
"Credit card issuers have a really good memory," explains FCRA certified credit expert John Ulzheimer. "If you have ever discharged debt in a bankruptcy with them, they will remember — even if you have rebuilt your credit score."
Your credit utilization is too damn high!
Your credit utilization ratio is the second most important factor that determines your credit score, accounting for a third of your FICO score.
If you’re unfamiliar with credit utilization, it’s simply your total credit card balances divided by your total credit card limits.
So even if your credit is good, you can be declined a credit card because your utilization is just too high. And while someone who’s highly utilized probably won’t have a very high credit score, there are those in-betweeners with middling but respectable credit scores that can be denied for this reason.
To access more credit, you’ll just need to pay your balances down to lower your credit utilization ratio.
Your credit is too good
Credit card issuers need to make money too – and people with high credit scores (see: responsible spenders) aren’t profitable. This can include people that have never carried a balance on their card, mortgage pre-payers, and borrowers only carrying a balance on low rate loans.
Ultimately, card issuers want consumers who will bring them revenue, not just a ‘good credit score’.
Luckily for Canadians, we don’t have the Card Act of 2009 like our neighbours down south, which requires card issuers to verify the applicant’s income and ability to repay. But you may still struggle to qualify for a credit card or type of loan even sans restrictive government law.
The reason for being declined a credit card due to no income is understandable: Lenders want assurance that they’ll be paid back for any money you use, and you don’t get a salary for maintaining strong credit.
There is one trick to work around this, however. Many credit card issuers will ask for your ‘household income’ – this doesn’t mean your personal income. So if a spouse or common law brings in an income and you’re a stay-at-home parent for example, you can list your household income to potentially qualify even if you’re technically not earning anything individually.
If you still can’t get the credit you deserve, consider a short term, personal loan from Magical Credit. We look past credit history and sources of income in determining who qualifies for a loan.
Take 5 minutes and apply for a loan online – you can have your cash direct-deposited to your account the next day.