ADVERTISEMENT

Can too many cards lead to loan rejection?

By

Credit Wise
Credit Wise columnist Kevin Weeks
With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (fcaa.org, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website studentloancounselors.org. Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

Ask a question.

'Credit Wise' archive

Question for the CreditCards.com expert

Dear Credit Wise,
I recently applied for a loan to be used to consolidate my credit card and car loan debt (total of which is about $29,000). I have no debt other than that and own in full (no mortgage) a home in a highly desirable neighborhood of Austin, Texas, now valued at about $400,000. However, my loan was turned down, and the reason cited was that I had too many credit cards.

I only actively use my checking account debit card and occasionally a Chase MasterCard. I have an American Express card, but the balance is zero, and I never use it. Obviously, I have on record more credit cards than that, and I would like to find out what they are and officially close them. How do I find out what credit cards I have that are still recorded as active?  -- Beth

Answer for the CreditCards.com expert Dear Beth,
I am somewhat surprised that your loan was denied based on what you told me. According to FICO, there is no such thing as a penalty for too much unused credit. Modern credit scoring systems and computerized underwriting have done away with "too much available credit" as a reason to deny a loan. About one-third of a consumer's credit score is based on credit utilization. What that means is that your score should actually go up -- not down -- when you have more credit cards and more credit available.

Nevertheless, you were denied and now you need to figure out what the problem is. Your first step should be to check AnnualCreditReport.com and get copies of your credit reports. You should be able to get reports from all of the credit reporting agencies -- Equifax, Experian and TransUnion -- for free since you were denied a loan. You will definitely be able to pull all three if you have not accessed your free reports in the past year. If you can only get one, try to find out which agency your lender got its report from so you can compare apples to apples.

Your credit report will list all of your outstanding debts and open credit lines. From what the lender told you and what you yourself believe, you must have other credit cards that you are either unaware of or have forgotten about. Examine the report closely because it could also be that some accounts listed do not in fact belong to you. If that is the case, you need to alert the credit reporting agency about the mistake and call the creditor. This is one of the hallmarks of identity theft and you may be a victim.

Be sure to follow up any telephone calls about accounts that don't belong to you with written correspondence. Send your letters certified, return-receipt requested to establish a paper trail.

It is up to you to decide if you actually want to close any accounts that do belong to you, but that you are not using. It might be worthwhile to follow up with the lender to see if you can get some clarification on why you were denied based on what FICO says about credit cards and available credit.

Be wise with your credit!

See related: Myth: Too much available credit hurts home loan, How to tell if a 'friend' stole your identity, Help your credit score rebound after a fall

Meet CreditCards.com's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Published: July 18, 2015


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 12-11-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT