Not all credit cards are created equal. Some offer more exclusive benefits and higher spending limits than others. These credit cards can be more difficult for the average cardholder to obtain. The answer to why some credit card issuing institutions are more stingy with their cards comes down to one deceptively simple concept: risk.
“Each creditor has their own level of risk that they are willing to take when approving consumers,” said Todd christensen, author of Everyday money for everyday people and an AFCPE Approved Financial Advisor. “If they are willing to take a higher risk, they will approve consumers with lower credit scores. If they want to take less risk, they will need higher credit scores for approval.
And this is not just a problem with the creditors.
“Many creditors have credit cards with varying tolerance for risk,” Christensen said. “This way the lender can offer a wide range of products to meet consumer demands. They could offer a low risk credit card for consumers with a high credit score, with more rewards and lower interest rates than their high risk credit card for consumers with low credit scores.
While credit score is a high indicator of risk, it is not the only factor that card issuers consider when reviewing card applicants.
Income level and occupation are taken into account
“Besides the credit score, the acceptance factors also extend to the income level and the reputation of the trade / profession across the industry, ”said Jordan Bishop, Founder and CEO of Oyster of yesteryear, a site that helps you optimize your finances while living an international life. “This can include the type of car you drive or where credit has been given to your name. The more reputable your name is in the credit industry, the more likely – or difficult – it will be for someone to be accepted for a credit card.
Too many credit cards can be a problem
Having too many credit card accounts in your name could signal a red flag to lenders.
“There is no magic number for a credit card company regarding how many other cards are acceptable and how many not, but they will factor in how many cards you hold in their final decision,” said John Li, co-founder and CTO of the financial lending company Fig loans.
“If you are considering your ideal credit card and think the number of cards you own is bothering you, it might be time to close one of your card accounts,” Li said.
“People are a little hesitant to close their credit cards because having less credit available will increase your usage rate and may temporarily lower your score, but sometimes it’s worth it. If you’re otherwise a fantastic candidate for a new credit card, you might want to delete an account. “
Higher fees are a barrier
Additionally, some credit cards are more difficult to obtain simply because they have higher fees, which excludes applicants with less cash. Especially those that offer more rewards.
Even with higher fees, having too many credit cards can negatively impact your chances of being eligible to sign up.
“Chase in particular is well known for having the 5/24 rule, which means you can’t have opened five credit cards in the past 24 months or they will automatically reject your application. You can increase your chances of approval for high signing bonus cards by spacing out your credit card requests.
Tips for getting approved for more exclusive credit cards
Laura Adams, MBA, personal finance expert at Searcher, provided some practical advice for consumers looking to obtain a credit card with a higher entry bar. Here’s what she recommends:
Examine credit reports to look for mistakes that could lower your credit rating without your knowledge.
Apply for a secure credit card that reports payment history to credit bureaus across the country to improve your credit scores.
Set alerts to make sure you never miss a payment due date on your bills, which can take a big toll on your credit.
Improve your credit scores by maintaining balances that do not exceed approximately 30% of your available credit limits.
Include all of your household income – such as employment, self-employment, scholarships, social security, and gifts – for you and your spouse or partner on one card application.
Bishop added a few more tips to increase your odds:
Never apply for more than two credit cards at the same time. Wait six months to a year between requests from one card to another. Otherwise, it will hurt your credit score.
Have a good credit score and check online for the credit rating range for the specific card you want. Knowing in advance can let you know if you are likely to be approved or not.
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Last updated: October 19, 2021
This article originally appeared on GOBankingRates.com: Here’s why it’s harder to get approved for some credit cards