How to get back on track toward opening a new secured credit card.
Getting denied for a secured credit card doesn’t feel great, especially if you’ve recently been rejected for an unsecured card. Your application may have been denied for a handful of reasons. Instead of letting the rejection get you down, it’s best to identify why you were denied and take action to remedy the situation before your next application. Here’s how you can get back on track toward opening a new secured credit card.
Why your secured credit card application might have been denied
While there are many reasons why your application could have been denied, here are a few of the most common causes:
- Poor credit score. Credit card issuers often require a minimum credit score to verify your ability to pay your bills.
- History of missed payments. If your credit score shows a history of missed payments, the issuer may be skeptical that your bills will be paid on time.
- A credit card balance that is unpaid for six months or longer. If you have a history of unpaid balances, credit card issuers may be unwilling to risk losing money if it were to happen again.
- Outstanding loans. Outstanding loans may be a sign that you are unable to pay off debts, which can be a red flag to some issuers.
- Inadequate income. Issuers want to make sure that you are able to pay your bill. If you have inadequate income, they may doubt that ability.
- Spotty employment history. Just like inadequate income, a spotty employment history may be a sign that you might not be able to pay your bill.
- Error on your application. This could be as minor as a spelling error or a wrong phone number. Always check to make sure all of your information is correct before submitting your application.
- Error on your credit report. Your application may also be rejected due to errors on your credit report, which can be resolved by contacting the relevant credit bureau.
- Too many applications or inquiries. Too many credit card applications or inquiries in a short period can decrease your credit score or indicate that you are relying too heavily on credit.
- Bankruptcy. Some issuers may see bankruptcy as a sign that you are unable to pay bills and could be unwilling to take that risk.
- Credit card is not eligible in your state. Every state has different laws and regulations surrounding credit cards, meaning that not all cards are available in every state.
How to find out why your application was denied
You’re legally entitled to know exactly why your application was rejected. Within 7 to 10 days of a rejected application, you should receive an adverse action letter from the issuer, which explains the reasoning behind your denial.
This letter is the key to understanding exactly why you were denied, as you can use it to make changes that will increase your chances of approval. Whether your credit score was too low or you simply made an error on your application, an adverse action letter is the first step to getting approved for a credit card.
Your next step is to check your credit reports with Experian, TransUnion and Equifax to see where you stand. You can request one credit report from each bureau per year. Once you’ve received your credit reports, take your time to examine them for any errors that may have caused your application to be rejected. If you see an error on any of these reports, you can dispute the issue with each credit agency. Visit our guide to correcting a mistake on your credit report for more information on the steps you need to take.
How to improve your credit before reapplying for a card
Building a positive credit score is an ongoing, long term commitment, but that doesn’t mean you can’t make an impact now. There are a number of ways you can start building your credit score, and here’s how you can get started:
- Pay your bills on time. This includes secured credit cards, utility bills, phone bills and more.
- Take your time between credit card applications. Applying for too many cards at once can reduce your credit score. If your application gets rejected, take a moment to understand why, then spend a few months working on your credit score before applying for others.
- Budget. Creating a monthly budget can help you understand where your money is going and help ensure your bills are paid on time. It can also decrease your debt-to-income ratio and reduce outstanding debts.
- Pay off outstanding debts. Outstanding loans and other debts can decrease your credit score. Paying off outstanding debts or bills can help you gradually build your credit score over time.
- Get a secured credit card. Secured credit cards are designed for those with poor or nonexistent credit and require a deposit. Responsible use and paying bills on time will allow you to build your credit score.
- Avoid too many credit inquiries. Applying for credit cards, mortgages, loans or other similar financial products can temporarily reduce your credit score. While your score will likely return to where it once was, spacing out credit inquiries can prevent it from dropping in the first place.
- Maintain low balances. If you already have a credit card, try to maintain a low balance. Doing so can make it easier to pay bills and indicate that you’re a responsible borrower. A DTI of 30% is ideal, so try to keep your balance as close to that number as possible.
- Avoid closing unused accounts. Having only newer accounts on your credit report can result in a lower score. Lenders and credit card issuers like to see a long history of credit in your report.
- Consolidate your debt. Consolidating several loans into one can streamline your payments and help you save money on fees.
- Manage your credit report. Some credit reporting bureaus offer services that notify you when there’s a change to your report. These services could be helpful in staying on top of your overall financial well-being.
How long should you wait before reapplying for a secured credit card?
Most credit card issuers suggest waiting about six months to reapply after being denied for a credit card application. Instead of rushing to fill out another application, take your time to build your credit over the next few months. Doing so can increase your chances at getting the best secured credit card possible.
However, there is no definite timeline. The six-month rule is just a suggestion, as the ideal time frame may vary depending on your current credit score, the required score for the new card you want and a handful of other factors. If you have a low credit score, you may need to wait longer, as it could take a while to build enough credit to be approved. On the other hand, if your credit score wasn’t too far below the required minimum, you might be able to get approved within three months.
Recommended secured credit cards with easy approval odds
Maybe you were denied because you simply applied for the wrong card. Some secured credit cards have easier approval rates than others. You can increase your chances of approval by finding the right secured credit card for your financial situation. Here are a few secured credit cards with easier approval rates.
Discover it® Secured Credit Card
- Bad credit is okay
- No annual fees
- Cash back on restaurants and gas
- High APR
- High late fees
- No prior bankruptcy
Secured Mastercard® from Capital One®
- Bad credit is okay
- No annual fee
- Mastercard and travel benefits
- High APR
- High late fees
- No unresolved bankruptcy
Green Dot primor® Visa® Gold Secured Credit Card
- No credit check
- Guaranteed approval if your monthly income is at least $100 more than your monthly expenses
- Low APR: 9.99% fixed
- $49 annual fee
- High fees for late payments, returned payments and additional cards
- Credit limit increase fee
- No rewards
Digital Federal Credit Union DCU Visa® Platinum Secured Credit Card
- Easy approval, soft credit check
- Low APR: 13.25% variable for purchases, balance transfers and cash advances
- No annual, balance transfer, cash advance or foreign transaction fees
- Must join the Digital Federal Credit Union
- No rewards
OpenSky® Secured Visa® Credit Card
- No credit check
- 19.14% variable APR
- No rewards
- $35 annual fee
- APR increases to 22.50% for late payments, plus a $27 late fee
Other options if you need money now
If you’re in a pinch and need a way to cover expenses, secured credit cards aren’t your only option. Here are two other payment methods you may want to consider:
- Prepaid visa and debit cards: Prepaid Visa and debit cards will require payment up front, but they provide a flexible and secure payment method for a low cost. You can use the card for purchases at any retailer, service provider or even online.
- Loans: If you need money right now, you could consider applying for a personal loan through a bank or credit union. You’ll likely need to provide collateral in the form of assets or equity, but personal loans can provide quick access to funds.
At the end of the day, getting denied for a secured credit might sting, but it’s not the end of the world. Applications are rejected all the time, and it’s possible that you just haven’t found the right card yet. There are a number of ways you can move forward from here, and whether that includes improving your credit score or finding a card that works for you, it all starts with your adverse action letter.
Use this rejection as an opportunity to find out what went wrong and address the issues that may be holding you back. As you work to boost your credit score over the next few months, your chances of approval may increase as well. Once you’re ready to apply again, explore the secured credit cards out there to find the product that’s right for you.