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What to do if you’re denied a credit card due to a high debt-to-income ratio

Be patient and work on lowering your debt.

Updated

If you’re denied a credit card due to a high debt-to-income ratio, there may be other types of cards you may qualify for. But the best option is often to look toward the long term and steadily pay off your debt.

What is debt-to-income ratio?

Debt-to-income ratio is the percentage of your gross monthly income that you use for debt payments.

Debt includes payments for rent and mortgage, alimony and child support, student loans, auto loans and similar expenses. It usually doesn’t include costs such as groceries, gas, utilities and taxes.

What is a high debt-to-income ratio?

A debt-to-income (DTI) ratio of 40% or more is considered high, and it often indicates financial stress. A good DTI ratio is generally considered 36% or less.

Card providers are essentially in the lending business, and they want to be relatively sure they’ll be repaid. To that end, they’ll check your DTI ratio to gauge your ability to pay your credit card bill. If you have a high DTI ratio, you have reduced odds of getting approved for a card.

Calculate your debt-to-income ratio

To calculate your DTI ratio, you’ll need two pieces of information:

  • Your gross monthly income — that is, your monthly income before taxes.
  • Your monthly debt payments.

Divide your monthly debt payments by your gross monthly income.

Here’s an example

Let’s say you make $60,000 a year, which comes out to $5,000 a month before taxes.

Each month, you pay $1,000 in rent, $200 in car payments and $300 in credit card payments. In total, your monthly debt is $1,500.

To get your DTI ratio, divide $1,500 by $5,000. That comes out to 30%.

Easily find your DTI ratio with our calculator

For a quick way to calculate this information, use our handy DTI ratio calculator.

You can quickly plug in details such as your credit card, car loan and mortgage payments, as well as your monthly income. Our calculator will do the rest, showing your DTI ratio and how it looks to creditors.

What to do if you’re denied a credit card due to a high debt-to-income ratio

If a high DTI ratio is the culprit for your credit card denial, work on paying down your debt. Many other lenders will find the same weakness in your application, so it’s wise to improve your DTI ratio before applying for another card.

As you lower your debt, you’ll likely find not only that your DTI ratio improves, but your credit score increases as well. These are two wins that will give you much better odds of approval for a credit card.

You may still qualify for other credit cards

If you’re set on getting a credit card, consider a secured card. This requires a security deposit, which a provider can use to cover your debt if you fail to make payments. For this reason, providers are often more willing to offer this card type to individuals they deem riskier customers.

You might also compare store credit cards, which may be accessible even if your finances are less than perfect.

Compare cards you may qualify for with a high DTI ratio

Here are a few great credit cards to consider if you’ve had trouble getting approved. Still, you may want to improve your DTI ratio first, as a high ratio often indicates structural problems with one’s finances.

Name Product Filter values Rewards Purchase APR Annual fee
CardMatch™ from creditcards.com
See terms
See issuer's website
See terms
Use the CardMatch tool to find cards you're likely to qualify for with your credit score, without a hard pull on your credit.
OpenSky® Secured Visa® Credit Card
N/A
17.39% variable
$35
Apply for this card with no credit check if you're new to credit or have bad credit.
DCU Visa® Platinum Secured Credit Card
N/A
11.5% variable
$0
A great way to establish or improve your credit history.
My Best Buy® Visa® Card
5% back at Best Buy or 6% back in rewards for Elite Plus members, 3% on gas, 2% on dining and groceries and 1% on all other purchases
11.9% intro for the first up to 48 months reduced rate (then from 25.24% variable)
Up to $59
Earn 5% back at Best Buy or 6% back in rewards for Elite Plus members in store and online.
Walmart Rewards™ Mastercard®
5% back at Walmart.com, 5% in-store with Walmart Pay for the first 12 months (then 2%), 2% on restaurants and travel and 1% on all other purchases
17.99%, 23.24% or 26.99% variable
$0
5% back at Walmart.com, 5% on in-store purchases made with Walmart Pay for the first 12 months after approval. After the introductory period, you’ll earn 2% back on in-store purchases.
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Compare up to 4 providers

How to improve your debt-to-income ratio

It’s wise to take your high debt-to-income ratio seriously, as it could have a big effect on your life.

Because there’s stress on your finances, just one unfortunate financial event — a job loss, car breakdown, etc. — could send you into deep trouble. A high DTI ratio may also keep you from advancing your financial life, as it’ll complicate your path to getting credit cards and loans.

Consider taking the hard path and tackling your DTI ratio now. With some sacrifice today, you can steadily build strong finances.

Here are a few ways to improve your DTI ratio

  • Increase your income.
    People often talk about reducing spending, but often overlooked is simply increasing your income. There are many ways to make more money, such as driving for rideshare services, freelancing or creating an online store. Working on side projects in the evenings and weekends can help you slowly lower your DTI ratio.
  • Put more of your monthly income toward your debt.
    If you have high monthly payments toward debt — for example, with credit cards — you can reduce them simply by paying off what you owe. This might take a while, but you’ll ultimately lower your monthly payments and accrue less in interest.
  • See where you can reduce monthly spending.
    By selectively cutting back, you can have more money to put toward your debt
  • Downsize.
    Especially if you have high debt payments for housing, your car or other expenses, you may be able to reduce your monthly burden by living below your means.

Bottom line

Getting denied for a credit card stings. By improving your DTI ratio, however, you can increase your odds for your next application. Consider opening a savings account and putting more of your income toward paying off your debt.

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