A secured credit card is a card that will require you to pay an upfront deposit as collateral for your line of credit.
This deposit is usually the same amount that will be on your account’s credit limit, which leads many people to believe that they will be automatically approved for the card as long as they have the funds to cover the upfront payment.
However, this is not always the case, and there is a lot more to it than this. If you are looking into getting a secured credit card, there are lots of things that you will need to know about the decision that will be made following on from your application.
We are going to tell you everything that you need to know about whether you can be denied a secured credit card in this article.
Yes, you can actually be denied a secured credit card if you do not meet the card issuer’s underwriting requirements.
These requirements are the standards that a card issuer will expect from any potential borrower, which can include things like your credit score, income, and existing debt that you may have.
If you have been denied a credit card due to any information that has been found on your credit report, the lender will usually send you an adverse action letter.
This letter will provide an explanation as to why you were denied, and the rights that you have as a consumer, like being able to obtain a free copy of your credit report.
If your credit score was the reason why you were denied a secured credit card, the letter will also include your score and the date that it was pulled. It will also state the method that was used to generate your score.
If you are wondering what to do next after you have been denied a secured card, you can keep reading to find out more information on what happens next, and how you can improve your chances of getting approved next time.
The adverse action notice that you will be supplied with will provide you with up to 5 reasons why your application has been denied. This will help you to understand how you can address the issue at hand.
You should also receive instructions on your adverse action notice that will explain how you can request a free copy of your credit report from the bureau that provided it to the card issuer.
You can usually find this through their online website after creating an account and providing answers to security questions to prove your identity.
When you gain access to your report, you should review the information and look for any potential areas for improvement. You should also keep an eye out for any information that may be inaccurate or fraudulent.
If you do find anything of this nature, you will be able to dispute. If it is found to be fraudulent, then it may be removed from your credit report.
There are some credit card issuers that will allow you to have a cosigner apply with you. This person will essentially vouch for you, which can mean that a credit card issuer views your application more favorably.
If you have a family member with a great credit history, you may be able to ask them to cosign. However, you should also know that your cosigner will be responsible for making your payments if you are unable to, which they may not be comfortable with.
Every credit card issuer will have a different criteria for approval, but there are some general things that they are looking for. Some of the reasons why you might not get approved for a secured credit card include:
– Not being able to demonstrate an ability to repay debt. Lenders are required by law to assess your ability to repay any debt that you incur on a credit card.
– Not having verifiable income. You may need to prove your income, and if you cannot do so, your application may be denied.
– You do not have enough funds for the edeposit. Even if you have excellent credit, if you do not have enough money to cover the card’s deposit, you won’t be accepted.
– Having negative items on your credit report. You can be denied for credit if you are going through a bankruptcy, or if there are any repossessions on your report.
– Having a low credit score. Secured credit cards are often accessible for people with bad credit, but there may be a minimum credit score that is required for approval.
You may be tempted to go and apply for a different card once you have been rejected for one, but a hard inquiry will be added to your credit report every time you apply for credit, even if you are denied. This is something that you should keep in mind, as it can further decrease your credit score.
Applying for multiple credit card accounts in a short period of time can also negatively impact your score.
Applications can also be denied outright due to the fact that you have applied for too many credit cards. This is why it is really important to try and improve your credit before you try and apply for another card.
Some things that you can do to try and improve your credit score include:
– Paying your bills on time
– Reducing any existing credit card balances
– Getting credit for things like utility and phone payments
– Only applying for new credit if you need it
Building good credit habits and keeping track of your improvements will put you on the right path to getting approved for a secured credit card in the future.