We don’t always get what we want and that includes access to credit too. It’s true however to some extent – ” you need credit to get more credit” and good credit at that.
You’ve lost me. I have a 750 yet I was denied for new credit!
Patience – we’ll get there but first we need to check a few boxes before we actually apply for access to credit which could be a loan or credit card application.
Credit score isn’t everything
You could have a rating of 750 by TransUnion but it holds no value in eyes of the lending agency or bank if you’re maxing out your available credit access every month a.k.a your credit utilization is greater than 30%.
Even worse if you’ve been spending a lot but only making minimum payments. This isn’t as bad as long your overall balance is less than that 30% mark. Yet companies feel more comfortable the lower your utilization – reducing the risk on them if you don’t pay up.
The next is depth of credit and average age of credit. Depth is the age of your accounts and average is just the total age of all active accounts by number of accounts. The latter is always going to be lower if you have more than one account opened.
If your average age is low, then a lender is less likely to approve you for a new access to credit because they have fewer data points to assess you as a borrower. That does not mean you will outright be rejected, but it does mean the more varied access to credit you have, the better it is for you.
Lenders also want to see if you’ve ever had missed payments or closed accounts on file. Any major changes like this stay on your credit report for 7 years from reporting. So it is very important to stay on top of this.
Missed payments can hurt you if you are careful and it’s repercussion can be a major factor in banks rejecting your application.
Example: You kept making minimum payments but forgot to make the last payment in full. Maybe you were short by $1 but even that is a red mark in your record. You could call up the bank and depending on the length of your relationship with the bank, you may make a case. Requesting for removal of a negative from a credit report is at the bank’s discretion. Since reports aren’t federal/state run, they are privately held and can hence be altered by whosoever reported something.
So what do I do if I got rejected?
Before we get there, we’d recommend creating a savings account. These generally require to keep a minimum amount at all times with the bank and hence can prove you have financial assets to back you up. Alternatively, being an existing customer to a bank is always good for new loan applications.
Having a Wells Fargo checking/savings account already has you in their system and they can monitor your activities to help determine if you’ll be a good borrower or not.
So, with that out of the way, there is a way to appeal your application. If you were “not approved at the time”, you may be sent a letter in the mail stating the reasons as to why or a request for additional documentation. In either case it is best to call the bank on their appeal line and put forward your case.
We’ll try our best to demonstrate with an example:
Applicant – A
Credit Analyst – C
A: Hi, I had applied for X credit card recently as I had certain purchases coming up I knew that this card is a perfect fit for. I’ve held Y credit card for (so) long and was just looking to expand. I’m more than willing to provide additional documentation as needed.
C: (possible responses)
1. Age of credit too low (<3 months)
Better to wait and re-apply a few months later.
2. Utilization high (>30%)
Respond with your first card gave you a low access to credit but you always paid back in full.
Tell them the number and if you’re a student and worker (if applicable) and you make (Your I-20 amount + your annual salary).
4. Asks a few questions and puts you on a brief hold while he/she pulls up your credit report (hard pull).
They might approve if all’s okay or request additional documentation to be emailed with a case number (make sure to note it down).
5. Outstanding payments
Well good luck then because we’re not equipped to answer that.
So, we hope this was helpful and now you know what to do incase of being rejected initially. If it works for you, congratulations on being approved! Spend wisely.
Please do note a few things.
1. Each new application per day will involve a hard pull but two applications with the same bank on the same day will only count as one pull.
2. Don’t lie, but don’t be entirely honest either. Be prepared to answered financial questions.
3. If it didn’t work the first time, call back after sometime.
4. Always be fluent, polite and courteous with the analysts on call. They are people doing their jobs and should not be yelled at if rejected.