Why your credit card application was rejected?

Why your credit card application was rejected?

Posted by: Aiden white on

When you get approved for a credit card, you’ll get the information immediately. But when your credit card application gets rejected, the credit card company may rarely inform you immediately. Instead, they will send you a letter, called an adverse action letter, within 7-10 business days of your application, informing you about that decision.
The adverse action letter will specify the reasons for which your credit card application was denied. The letter will also include instructions for getting a free copy of your credit report.
There are some possible reasons that can make your credit card application rejected. If you can’t guess why, check out the reasons below:

1. You have high credit card balances

The credit card company will always want to see that you’re using a tiny portion of the available credit. But, if you’re using too much of the available credit, you can expect that your next credit card provider will deny your credit card application.
So, what you can do about this? Simple.
You should Keep your credit uses below 30% of your available credit.
It is best for your credit score and will put a positive impression on your credit card providers. As a result, your chances will increase to get approved for a new credit card.

2. Your loan balances are quite high

Carrying too much loan or debt might become harder for you and might lose your affordability. If your credit balances are high, and you are paying too many monthly payments to pay off your debts, then credit card providers may think twice before approving you for a credit card. As a result, they might reject your credit card application.
So, you need to reduce your debts, pay off your loans, and improve your chances at getting approved.

3. Too many inquiries on your credit report

If you have applied for too many credit cards within a short period, it can be one of the reasons behind your credit card application rejection.
You should try to reduce the frequency of your credit shopping, so that your inquiries also get reduced. There’s no fixed number of inquiries which will prevent you from getting a credit card. So, reduce your credit inquiries as low as possible.

4. Your income is quite low

The income criteria may vary depending on the different credit card providers. Your credit card application can be rejected if you don’t earn enough to afford monthly payments on your debts and that particular credit card.
Credit card companies initially hide the minimum income requirements for their credit cards. So it’ll be your job to calculate and apply for the perfect credit cards that’ll fit your income.

5. You have a recent delinquency

Credit card providers will definitely have a look at your credit report to find out any type of delinquency on your report. They will also consider how long you were delinquent.
Your recent payment history will be considered to decide how well you’ll handle a new credit card. Recent delinquency may create trouble for your credit card application.
So, too many delinquencies may be a prime reason that your credit card application is rejected.

6. You have a short credit history

Your credit card application might be denied if you’ve never had credit previously.
Your credit report will contain all of your financial activities, including credit accounts.
You need one credit account active for six months so that FICO can generate a credit score for you.
If you don’t have a credit score, the credit card providers may reject your application because they can’t estimate your creditworthiness.
If you’re about to build credit, consider a secured credit card or student credit card to get your credit history started.

7. You have a Charge-Off credit account

A charge-off account is a credit account that is unpaid for the last six months or more. The original creditor usually sells off the account to a third-party collector. It’s one of the darkest errors appearing on your credit report.
If you have a charge of credit card account recently, a new credit card provider will definitely ignore your credit card application.

8. You are too young to get a credit card

If you’re under age 18, your credit card application might get rejected because you’re under the legal age to use a credit card. But there are also some exceptions.
You might get approved for a credit card if you have a decent income and you’ve already been added as an authorized user to your parents credit card.

9. You have an unstable job history

An unstable work history can make your credit card application rejected. Credit card providers may want you have a decent job with a consistent work record.
If you’ve been job-hopping or facing unemployment for a period of time, you may experience a hard time getting approved for a credit card.

10. You didn’t properly fill out the application form

If your application is missing important information, like your physical address or the date of birth, or any other required info, your application will be rejected instantly.
The best thing about most online credit card applications is that they won’t accept the application as “completed” and won’t let you submit the application form until it’s correctly filled.
So, try to apply through online application form. That way, you may eliminate the risk of having your credit card application denied.

Conclusion

The adverse action letter may include instructions to order a free copy of your credit report. Credit card providers normally do this if there are errors on your credit report which led to the rejection. Order the credit report and review it for any errors. Dispute errors with the credit bureau if you find any. Otherwise, use this free credit report as an opportunity to repair your credit before your next credit card application.

How to budget with credit cards in 5 steps

How to budget with credit cards in 5 steps

Posted by: Aiden white on

Why you should use credit cards for budgeting in the first place?

If you think from the basic level, credit cards can help you with two important uses for budgeting:

  • Help you to manage your cash flow by allowing 30 days for making interest-free payment.
  • Assist you to track each expense you make which is one of the basic steps for budgeting.

A credit card gives you the benefit of maintaining the cash flow. It will also help you to maintain the balance between your income and spending needs each month.

Tracking your expenses is required to assess your spending habits on a month-to-month basis. If you try to build a budget with a credit card, there are a few of them available that will help you to categorize and chart your expenses.

How to build a budget with a credit card

To use a credit card to build a budgeting strategy, you should first require a workable budget in hand. Collect your latest credit card statement or you may check it online, and go through all the transactions. Then, you must categorize your expenses. A budget worksheet is useful for you in this case. It features common expense categories and it is easier to add up your money that’s going out. Later you may compare it with the money that’s coming in.

Now you’ll have all the expenses listed up in front of you to compare it with your income. The next thing you should do is to find answers to these candid questions:

  • What expenses are necessary and you can’t avoid?
  • Which expenses you can avoid for a while?
  • Is your spending under control?
  • Can you manage money for an emergency purpose?
  • Are you able to set money aside for savings, retirement, and investments?
  • Are you able to pay off your debts properly?

If you are getting positive answers to these questions already, congratulations!

Now, if you don’t have the answers clearly, you may strictly follow these below-given steps and successfully build a budget with a credit card.

Build a budget with a credit card in 5 steps

Once you’re clear with a budgeting strategy, these 5 steps will help you to achieve success:

Step 1- List all of your expenses

When you create a budget for the first time, the initial thing you need to do is to make a list of your actual monthly expenses. You may start by listing everything you pay for every month, such as your mortgage or rent payments, credit card bills, car installments, food costs, utility bills, along with certain annual payments like insurance premiums, etc. List the important along with other non-essential expenses, if you want to become successful with your budget.
Here’s where your credit card statement comes in handy. Make sure to include the little purchases you might have forgotten about.
However, to do so, you should make all the payments through your credit cards.

Step 2 – Compare the total expenses with your income

Once all your expenses are listed, it is crucial to compare the total expense with your actual income. Chances are, you already know the answer.
If your monthly spending is higher than your monthly income, you’re probably going to fall in debt or are already in deep debt. On the other hand, if your income is higher than your monthly expenses, you have the option to save money each month. Generally, we use credit cards for paying most of the expenses.

Step 3 – Find out options to cut expenses

One of the best ways to save from your ever-growing expenses is to look for other ways to reduce expenses. After all, reducing non-essential costs and saving money… that is the real motto of budgeting in the first place, right?
You may practically set up a budget for spending. For example – if you like to spend $200 a month for “eating out,” you may set up a budget with that number keeping in your budget plan.
Your credit card monthly statement for the last two or three months may help you to analyze how much you’re spending on each category. You need to compare your current months’ expenses in different categories with last month. You need to focus on necessary categories first, such as groceries, utilities, credit card bills, phone bill, meds, etc.
This way you have a clear picture of your current spending pattern. You will know whether you are spending more or spending less than in the last few months. Once you find out your problem areas, you’ll need to prepare a plan to adjust the expenses meaningfully.

Step 4 – Create realistic budget categories for next month

Once you are aware of the facts of your spending in the last three months, it’ll be the right time to create new budget limits. You can do one thing, take your average spending on the last three months and fix it on each variable category. For next month, try to reduce it down by 20%.

Step 5 – Start the new month with a fresh budget

Once your new budget is ready, start the new month with a brand new budget plan. This is where your credit card can be helpful. In the new month, do not use cash or debit card to make payments. Instead, start making the entire purchases by using your credit cards.
You may need to see the current status of your new budget once a week, so take a look at your statement online.
Pay your credit card bills in full per month so that you may stay on track and avoid paying interest.
If you find that you are crossing your budget almost every week, you may ask your credit card provider to reduce your credit limit to the amount you intend to charge each month. For example, you might have budgeted $2,000 each for groceries, transport, gym, gas, entertainment, Internet, and cell phones. So, you may ask your credit card company for lowering your credit limit to $2500 so that you may stay within your budget and have $500 for emergencies.

Conclusion

Credit card to build a budgeting strategy can be easy as the credit card itself is a valuable tool. But you must keep all the records of your spending, else you can’t create a great budget to manage your finances well.