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Million Mile Secrets reader Kendra emails:
Can you address if you or others have run out of cards to apply for?
I applied for 10 personal and 6 business cards last year, and I’ve gotten denied for my recent applications with Capital One, Chase, and Barclays (already have 2). I can’t believe you can get 6 per quarter for years. I feel like we’re at a stopping point and have to give up on this game for 6 to 24 months. My husband thinks the game is over for us. We just started in June 2014.
I’m not going to call the Capital One reconsideration line for the denied credit below because it’s all true. I noticed you don’t promote Capital One cards on your website. Is it because they are difficult to get?
- Based on your credit report from Equifax, too few or no revolving accounts have a balance
- Based on your credit report from Trans Union, there are too many new revolving accounts
- Based on your application information, income is insufficient for requested credit
This can be common issue for folks who’ve been collecting miles and points for a long time. But you don’t see it so often with folks who are new to the game!
Why Do Banks Deny Credit Card Applications?
Credit card issuers will deny applications for many reasons, but for most folks in our miles & points hobby, it’s usually because of too many recent credit inquiries.
When deciding whether to approve your application, banks will look at:
- Your credit score and history (on-time payments, delinquent accounts, bankruptcies)
- Number of recent credit inquiries or “pulls”
- Whether you’re carrying balances on your cards, and how much of your credit limit you’re using (utilization)
- Other debt (mortgages, car loans, student loans, etc)
- Annual income or household income
How do these factors apply to Kendra’s situation?
1. Credit Score & History
According to FICO, your credit score is broken down as follows:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of Credit
The 2 biggest factors are your payment history (do you pay your bills on time?) and balances you owe. But the amount of recent credit you’ve applied for also has an impact.
2. Recent Credit Inquiries
Kendra applied for 10 personal and 6 business cards last year, and has only been applying for cards since June 2014. That’s 16 cards in ~7 months!
Each time you apply for a card (whether you’re approved or not), your credit score will decrease by 3 to 5 points. This is usually temporary and your score should bounce back after a few months (as long as you use your credit responsibly). But a LOT of applications in a short period of time could cause a big drop in your score.
And credit card issuers will specifically look at the number of recent credit inquiries when deciding whether or not to approve you. They might look at someone who’s applied for a lot of cards in the past few months as a risky borrower.
Either way, that’s a lot of credit cards in a relatively short period of time. It might be time to slow down or take a break!
3. Balances and Utilization
I’ve written that you shouldn’t apply for credit cards unless you can pay them off in full each month, because the interest you’ll pay negates any benefit from the miles and points you receive.
And you should keep your utilization (the ratio of balances to your credit limit) low. Banks may view you as a credit risk if you’re constantly maxing out your cards.
That said, banks DO want to see you using your credit cards. Kendra’s application was denied in part for:
…too few or no revolving accounts have a balance
Card issuers don’t like it when you spend just enough to get the sign-up bonus, then stick the card away in a sock drawer. And banks like Barclays have denied folks just because they haven’t been using their other Barclays cards!
Think of it this way – why should a bank consider issuing you new credit if you don’t use the existing credit they’ve given you at all? So use your cards – even a tank of gas, grocery trip, or a restaurant meal here and there can make a difference.
4. Other Debt
If you’re up to your eyeballs in mortgage payments, student loans, and car loans, banks might be reluctant to issue you a lot of new credit.
They’ll look at your total debt before approving your application, not just credit card debt. And they’ll consider your ability to pay back what you’ve borrowed before they extend you more credit.
Remember, late payments will show up on your credit report. So it’s important to pay all your bills on time (not just the credit card kind!).
5. Annual Income or Household Income
There’s a limit to the maximum amount of credit each card issuer will extend to you. Much of that depends on your income.
Whether it’s from your own employment or from others in your household, your income (your ability to pay back debt) is a huge factor in the bank’s decision.
Often, if you’ve reached the limit of total credit a bank will give you, your only choice may be to reduce credit lines on other cards (or cancel them altogether) if you want to be approved. Kendra may want to consider calling the bank’s reconsideration line to see if she can get credit lines moved around.
That said, it’s a good idea to try to hang onto no-annual-fee cards. Because keeping them for the long term will increase the length of your credit history and possibly improve your credit score.
Remember, even if you cancel a card, many banks will let you get the sign-up bonus again after waiting 18 to 24 months.
Are Capital One Cards Harder to Get?
Kendra asks if Capital One is stricter with their credit approvals. I don’t often write about these cards because they’re not the best cards for Big Travel with Small Money. That said, the Capital One Venture Rewards Credit Card might appeal to folks who’ve already gotten lots of cards with other banks.
It’s sometimes harder to get approved by Capital One because they pull your credit score from all 3 credit bureaus. Usually, other banks only pull from 1 credit bureau.
So Capital One will see all of your recent credit applications, which can make things trickier if you’ve recently applied for lots of cards. And because your Capital One application will show up on all 3 credit bureaus in the future, it might not be worth it unless you really want a Capital One card!
I prefer the Barclaycard Arrival Plus card, because you get 2.2% back when you redeem points for travel. And building a good relationship with Barclays means it might be easier to get approved for their other valuable travel cards.
Plus, it has a similar sign-up bonus and, like the Capital One Venture card, has no foreign transaction fees.
Kendra and her husband don’t have to quit! They’ve only been applying for cards for ~7 months!
But it sounds like it’s time to slow down. I’d suggest waiting at least 3 to 4 months before they apply for new credit, so that their credit scores bounce back. And that way, there won’t be as many recent inquiries on their credit history.
There are always new cards to apply for!
It might be a good idea to consider moving or closing some credit lines, but I like to wait at least ~11 months before cancelling a new card. Banks don’t like it when you apply for a card, earn the sign-up bonus, then cancel right away.
And it’s best not to cancel your oldest cards (because they help your length of credit history).
Meanwhile, there are lots of ways to keep earning miles and points by using their existing credit cards!
Applying for a lot of credit cards in a short period of time can make it hard to get approved for new credit. And if you’ve reached the total credit limit that a bank will issue you (based on your income and other factors), you might have to close or transfer credit lines to get approved.
It’s best to be conservative and avoid applying for too many cards, especially if you’re new to credit cards. Read my post about the dangers of applying for credit cards to learn more.
If you’ve gotten too enthusiastic,
take a break from applying for credit. Use the cards you have, manage your credit responsibly, and don’t carry balances. In time, your credit score should bounce back and it will be easier to get approved.
Have you had trouble getting approved for new cards? Please share your experiences in the comments.
Thanks for the question, Kendra!