When Ryan Inman switched banks and applied for a new cash-back credit card, his application was denied despite his excellent 770 credit score.
“I found it hilarious,” said Inman, who works as a fee-only financial planner for physicians. The two-page decline letter indicated he was nixed for “having too many credit lines open.”
At the time, he had about nine credit cards and mortgages for his primary home and three rental properties.
But he’s diligent about paying his bills on time and keeping his credit balances low—two important credit-scoring factors.
Turns out even if your credit score is above the required cutoff, you can get denied for a new credit card for reasons known as high-side overrides, which deny an applicant with credit above a qualifying tier. These overrides tend to happen when...
You have insufficient income
Credit card applications ask for your income and monthly rent or mortgage payments.
They do this so they can calculate your debt-to-income ratio, or DTI. A low DTI could be a good predictor of your ability to pay credit card bills in the future, while a high DTI may prevent you from qualifying for a credit card.
Oh, and don’t lie about your income. It’s illegal to lie on credit applications.
You recently filed bankruptcy
A bankruptcy on a credit report significantly drops your credit score.
Even after your score recovers it could affect your ability to get a new credit card or loan.
Depending on the card issuer, you may need to wait several years before you’re eligible for a new credit card.
You can’t get any more credit
Credit card issuers may have a limit on the total credit they’ll extend to cardholders based on a variety of factors, including a person’s credit score, income, and monthly rent or mortgage payments.
Even if you qualify based on other factors, the issuer may decline your application based on your combined credit limits.
However, there may also be a solution for this roadblock. You could call the issuer and ask if it will lower your credit limit on one, or several, of your other cards and use that newly available credit to open your new card.
You’ve opened too many new accounts, too soon
This is likely what got Inman. If you have too many new credit applications within too short a period, you’re statistically a riskier applicant.
For example, trying to obtain a large amount of new credit could indicate that you’re facing a financial emergency, and will have trouble paying for it, which poses a risk to some creditors.
The issuer has other restrictions
Some issuers have other criteria that you need to meet to be eligible for a credit card.
You can usually find these issuer-specific terms with some due diligence, online research, or by reading the criteria within the fine print on the application.
But it’s not all bad news.
As with high-side overrides, there could be other reasons why a credit card issuer might approve your application.
For example, if you’re applying for a new credit card issued by your bank, your loyalty as a long-time bank customer and your high bank balances may count more.
Understanding these rules can help you understand how to get new credit.
Remember, your credit score is important, but it’s only part of the equation.