Have you applied for credit and received a denial letter? Frequently, people who feel they have good credit receive these letters and are mystified about what went wrong. You may have always made your payments on time, never had any collections, and for some reason, the banks are unwilling to lend you money. Then, to add insult to injury, you’ll receive this form in the mail that you were told was going to explain why you couldn’t be approved for credit, but when you get it, it doesn’t seem to make sense. It is a bunch of codes and phrases that you may not understand. There also might be a list of things that make it appear that you are some kind of dead beat with several credit issues. However, keep in mind, one issue may fall under several categories. It usually looks worse on paper than it really is. Here’s a list of the reasons for credit denial and what they mean. This should help you understand why you weren’t approved and what you can do to fix that issue.
Amount owed on accounts is too high — This means that your overall balances (the total of all the balances on all of your accounts) is too high. Your gross monthly income might not be enough to sustain this amount of debt. To correct this error, you will need to come up with a plan to get your debts paid down. You will probably not be able to get any more credit advanced to you until you’ve paid some down because the creditors don’t want it to become difficult for you to pay them back.
Level of delinquency on accounts – This means your accounts are 60-90 days past due. If you have anything that is currently past due, you will find it impossible to get a credit card. Nobody wants to lend money to someone who is already obviously having trouble making payments. Get your accounts caught up and keep them that way for several months and try again.
Too few bank revolving accounts – This basically means you don’t have enough credit. It’s really a catch 22. How do they expect you to have more if nobody will give them to you? The best way to do this is open a couple of secured credit cards. These are the types that you put the money up front. Keep them active for a while and then trade them out for something better when you’re able to.
Too many bank or national revolving accounts – This is the opposite of the above. You have too many open credit cards. This can happen if you’ve opened too many department store cards to get the extra 15% off. You may not have a balance on any of these, but have ended up with about 15 of them open. Go through and close all but 3-5 of them if they don’t have any balances. If they do have balances, try to pay them off and then close them. Be sure to keep about 3-5 of them open so you don’t get hit for having too few.
Too many accounts with balances – You have balances on too many accounts. Narrow down the cards you use all the time to about 3 and then pay off all the rest.
Too many consumer finance company accounts – this means you’ve taken out too many high risk loans. These are good if you’re having trouble getting someone else to approve you, but they still have a bit of a negative impact on your credit score. If you have to use one of these loans, be sure to pay it as agreed and get it paid off quickly. Paying these off as agreed will help improve your credit score and allow you to get a more normal risk loan next time.
Account payment history is too new to rate – This means you’ve only recently established any credit history at all. Go slow at establishing it. Have only a few open accounts at first. Wait about 6 months, make sure you’re making your payments on time, and then try again.
Too many recent inquiries last 12 months – You may have applied for too many loans in the last 12 months, or more likely, one creditor has listed multiple inquiries when you applied. Contact them and ask them to remove or consolidate the inquiries. If all the inquiries are legitimate, wait until you have less than 6 in a 12 month period and then try again.
Too many accounts recently opened – You’ve opened up too many accounts in the last 12 months or so. Don’t try to open any more for at least another year unless you’re paying some of them off. Applying for too much credit at once makes you look desperate and desperation makes lenders wary.
Proportion of balances to credit limits is too high on bank revolving or other revolving accounts – this means your credit card balances are too close to their limits. Get these paid down to about 30 -50% of the limit. This is sometimes why consolidating loans can cause problems. If your limit is $5,000 and your at $4800, but you only have the one loan now, you may still see this denial reason. You might try requesting to get an increase in your limit. In the future, do everything you can to keep the balances of your cards away from the credit limits.
Amount owed on revolving accounts is too high – Similar to the above – keep all revolving tradelines below 50% of the credit limit or try asking for your limits to be increased.
Length of time revolving accounts have been established – This means you haven’t had credit established long enough for them to be able to judge your credit worthiness. Continue making timely payments for the next 6-12 months and try again.
Time since delinquency is too recent or unknown – You have had late payments or collections too recently and you appear desperate to get credit. The fear is that you will use their credit to pay others off and then you won’t be able to pay them. Get all of your accounts caught up, make timely payments for about 6-12 months and try again.
Length of time accounts have been established – Your accounts are too new. Keep paying as agreed for 6-12 months and then try again.
Lack of recent bank revolving information – You are lacking revolving credit card depth (again, just a time thing). Wait 6-12 months of making timely payments and reapply.
Lack of recent revolving account information – There isn’t enough recent information on revolving debt to make a decision about what type payer you will be. If you don’t have any other credit cards, try getting a secured one and make timely payments for 6-12 months and then reapply. If you do have other credit cards, pay as agreed for the same amount of time and try again.
No recent non-mortgage balance information – This means you aren’t using any credit and there isn’t enough information to determine what type of payer you are. Use a couple of the accounts you have (or get a secured card if you don’t have any open ones) and charge about 10-15% on each account. Don’t pay them off in full every month. Instead, make timely payments for 6 months and then try again.
Number of accounts with delinquency – You have too many accounts that are behind. Bring them all current and pay as agreed. You may need to wait 12 months of paying as agreed after they are brought current before getting more credit
Date of last inquiry too recent – You’ve applied for other credit recently. This suggests desperation and negatively impacts your score. Wait a few months and try again.
Too few accounts currently paid as agreed – This means you have multiple accounts that are in collections or have been late. Pay your bills on time and in full.
Length of time since derogatory public record or collection is too short – You have had a recent judgment or lien which needs immediate attention to be removed from your credit report. Your score will improve some as soon as it’s paid.
Amount past due on accounts – You have an account that has a substantial amount past due. It requires immediate payment.
Serious delinquency, derogatory public record or collection filed – You have a large judgment, collection, or lien. You’ll need to pay it immediately.
Number of bank or national revolving accounts with balances – You have too many accounts with balances. Start paying them down or close some right away. If you’re going to close them, start with the most recently opened ones first.
No recent revolving balances – You don’t have any activity on your revolving accounts. Charge small balances on a couple cards and don’t pay them in full right away. Instead, make timely payments for 6 months or so.
Number of revolving accounts – This means you have too many credit cards or lines of credit open that are not active. Just close them all except for 3-5.
Number of established accounts – You don’t have enough accounts that have a lot of history. Try to keep 3-5 accounts open and active for 6-12 months.
No recent bankcard balances – Again, you don’t have enough recent activity, maintain small balances and make timely payments for 6 months.
Time since most recent account opening too short – You’ve only recently opened another credit line. Keep paying as agreed on your accounts and wait 6 – 12 months for a more established history.
Too few accounts with recent payment information – This is yet another way of saying you don’t have enough tradelines. Open a couple of secured credit lines and carry small balances on them. Make timely payments for 6-12 months.
Lack of recent installment loan information – This means your creditors are not updating your credit report. Contact your current loan companies and ask them to update your payment history on your credit report.
Proportion of loan balances to loan amounts is too high – This means you are too close to your credit limits. Keep each of your balances at less than 50% of your limits.
Amount owed on delinquent accounts – You have too many accounts that are not being paid as agreed with substantial balances. Get these current as soon as possible and pay them in full.
Serious delinquency and public record or collection filed – You have collections, liens, or judgments that need to be paid. Get them sorted out and paid in full immediately.
Serious delinquency – You have too many collections, liens, or judgments. Pay them off as soon as possible.
Derogatory public record or collection filed – You have a derogatory judgment, lien, or collection account. Get it settled and paid as agreed as soon as possible.
Hopefully, this helps you understand what is going on with your credit. The credit game can be so crazy since there are so many factors that play into your credit score. As you can see, it can be just as damaging to not have enough credit as it can be to have too much. Typically, just having a few tradelines on your credit report that are open, active, and paid as agreed is enough to keep your score in a good range to help you qualify for credit as you need it.