Hi, my name is John Ulzheimer, and I'm a credit expert who contributes to
CreditCardInsider.com. If you have any questions then please submit them in the
comments section below. Today's question is this: What happens if you are denied for a
credit card? Well, when you're denied for a credit card or a variety of things
happen or have happened.
Generally speaking it's pretty easy to get a credit card. There's a fairly low
barrier to entry and most people who have anything other than just horrific
credit can get some form of a credit card. There's a wide variety of credit cards
all the way to subprime credit cards, and those are for people who've got really bad credit,
all the way to the super prime credit cards, and those are for people who've got fantastic
credit. Those are going to be the ones with the really high credit limits. When you
make an application for credit, the credit card issuers pulls your credit
report and your credit score. Based on that information, they're going to either
approve the application or they're going to deny the application, or they may
actually counter offer you for some other product that they feel is a better
fit for the risk that you pose to the bank. If, however, they have nothing for
you because your credit is just so poor, then they're going to send you what's referred to
as an adverse action letter, or a notice of adverse action, which is more informally
referred to as a declination letter. This is what happens when you're denied for a
credit card. One of the myths about credit denials is that some record of
the denial is reported to the credit reporting agencies. That's absolutely
untrue. There is no section of any credit report, and frankly there has never been
a section in any credit report historically, where information about
denials is housed. So there is no section that says "John was denied an American
Express card in May of 2015." There is no section, there is no information,
it can not be gleaned from looking at a credit report. Impossible. The notice that
they send you, and it's generally a letter that they're going to mail to you, has some
information on it
about the information they used as the basis for their decision. Because the
information that was used as a very likely going to be a credit report and
credit score, the issuing bank has to disclose to you where they got the
information from. So, if they pulled your Experian credit report and used that as a basis
for their decision,
they've got to tell you that. They've also got to give you Experian's contact information
and also let you know that you have the right to a free copy of that report because it was
used as the basis for denial. They also have to disclose your credit score, if in
fact they did get a credit score and use that as well as part of their
decision-making process. So, again, let's say they pulled you VantageScore from Experian,
and it was 520, and that's below their minimum standard, and they denied you as a
result, they've gotta tell you that they pulled your VantageScore and it was a 520.
They also have to let you know where you rank relative to other people in the
United States so you'll know "Hey, I rank in the lowest 10% or I rank
in the highest 10%," so it gives you an idea and indication of how you're performing
relative to your peers. The obligation to send you this letter, or some form of
notice that you've been denied, is in fact an obligation. It's not a choice.
The Fair Credit Reporting Act requires that any time you're denied a credit card or any other
form of credit based on information in your credit report, which includes a credit
score, then the issuing bank or the service provider has to send you this
notice. It's not voluntary, it is in fact a requirement under federal law.
When you're denied credit it is very likely that you're going to find out you
were denied for credit based on that letter. So it's very unlikely you're going to get a
call from the bank saying "Hey, we just want to let you know you've been denied credit. We're gonna send you a
letter in a few days." It's very likely you're not going to get any phone call from
anybody, you're just going to get the letter and the letter is going to be the delivery
mechanism of the denial
related information. It's unfortunate; the good news is that you are not precluded
from going out somewhere else and applying for credit with another bank and after
you are able to improve your score to some extent then there's nothing to
preclude you from applying for credit with the same exact bank, although you may
choose to to look elsewhere because you already know that they've got fairly
rigid standards relative to your credit rating and credit report
information. So if you have any other questions about credit or financial
topics then please submit them to CreditCardInsider.com or in the comments
section below. Thanks a lot for watching, and have a nice day.