What to do when your balance transfer is denied
Having a low credit profile or not enough credit limit can cause a denial; here's what you can do
Making complex credit topics simple
A balance transfer card can be a shortcut to getting out of debt faster if it means paying a lower interest rate. Despite the Federal Reserve’s recent interest rate hikes, there are still plenty of 0 percent APR balance transfer deals to be found.
“Balance transfers are tools,” says Howard Dvorkin, personal finance expert and Debt.com chairman.
Dvorkin says in the best-case scenario, you execute a 0 percent APR transfer and pay the balance down before the promotion expires.
Getting approved for a balance transfer isn’t always a lock, however.
Two scenarios can keep you from executing a balance transfer successfully:
- Your application for a balance transfer card is turned down by the card issuer.
- Your application for a balance transfer card is approved, but when you try to transfer a balance to the new card, the transfer is declined, or the credit limit you were approved for is insufficient to cover the amount you want to transfer.
If you’ve been turned down on either situation, it helps to know why you were denied and what you can do next.
See related: 9 things you should know about balance transfers
Balance transfer denied? Here's what you need to know
Why credit card companies can nix a balance transfer card application
It could be one thing – or several things – that leads to a balance transfer denial.
1. Applying for a balance transfer card with the same card issuer
“Most card issuers won’t allow a balance transfer between two cards that they issue,” says Marshall Armond, CEO of consumer credit education site CreditRevo.
“While this might seem like a way of simplifying the task by staying with an institution you know, it’s actually just a guaranteed way of getting your application rejected,” says Tina Hay, founder and CEO of Napkin Finance.
Applying for balance transfer requests too frequently could also block your way to approval if multiple hard inquiries ding your credit score.
2. Having a low credit score
A too-low credit score could keep you from making the approval cut, even if you were pre-screened for a balance transfer offer.
“Just because you’re pre-qualified or pre-approved doesn’t mean you’ll be approved for a balance transfer,” says Richard Best, an expert with coupon and deal site Don’t Pay Full. “When you respond to a balance transfer offer, the issuer does a full credit check, and if your credit score doesn’t meet its criteria, you may be declined, or it may issue you a card with higher balance transfer APR.”
“Generally, they like to offer balance transfer promotions to customers they don’t think will default on their balance,” says Armond.
Every balance transfer credit card is different regarding the minimum score it requires for approval.
- The Capital One Quicksilver Rewards card, for example, features a 0 percent balance transfer offer and is suited for people with good to excellent credit.
- By comparison, it’s possible to get approved for a balance transfer with the Discover it Secured card with bad to fair credit.
Hay offers a good rule of thumb to follow: “The better your credit, the more likely it is that you’ll be approved, and be approved for better terms.”
She says the same things that can dim your chances of approval for other loans or lines of credit also apply to balance transfers. That includes late or missed payments and accounts that are close to their limit or maxed out.
Having a thin credit file could also be problematic. Credit card companies may not be willing to approve a balance transfer if you’ve only been using credit a short time or have just one or two active credit accounts.
Why a balance transfer can be denied – even if you’re approved for a balance transfer card
The first reason is not having enough available credit to complete the transfer, says Armond.
Banks can limit balance transfer requests to a set dollar amount, or percentage of your new credit line. USAA, for example, caps balance transfers at 95 percent of the balance-transfer card’s credit limit.
How to increase your balance transfer approval odds
Put these tips to work to minimize the chances of being turned down for a balance transfer going forward:
- Check your credit score. If your credit card offers free monthly credit score access, use it, says Armond. “Once you know your FICO score, and how good or bad your credit is, you can use that information to see if you qualify for the credit card you want to use to initiate the balance transfer.”
- Fix credit reporting errors. “It’s not uncommon for your credit report to contain errors, including misreported payments or credit limits,” says Best. “Thoroughly review your credit report and contact the credit bureaus to dispute errors.”
- Know the issuer. If you have a card or two in mind for a balance transfer, scout out the card issuer’s transfer policies. You don’t want to waste time (or risk a potential credit score ding) applying for a balance transfer if it’s likely to be denied because you already have a card with that bank or because the amount you want to transfer is more than the credit card company allows.
- Review your credit limit. Make sure your card has enough room to accommodate a balance transfer.
- Toe the line with your existing credit accounts. If your score isn’t quite what it needs to be to get approved for a balance transfer, work on doing what you can to improve it. “Make at least the minimum payments on time,” says Dvorkin, and focus on paying down some of your credit card debt to improve your credit utilization.
What to do when your balance transfer is denied
Getting denied for a balance transfer card may be inconvenient, but you can recover by taking the right steps.
First, you could ask the credit card company to reconsider. Whether you get the green light depends largely on why you were denied to begin with.
If a denial is due to poor credit or low income:
Best says you may be able to succeed in getting a reversal if you can offer extenuating circumstances to explain negative marks on your credit report – which you can check at no cost anytime at CreditCards.com.
The same goes if your request was denied because of low income, but you have other sources of income that weren’t reported on your initial application.
If your request was denied due to a lack of available credit:
Armond says you can resubmit your original request using a smaller dollar amount. You’d then have to decide whether to pay off any remaining balance to the first card or apply for a second balance transfer card elsewhere.
Consider carefully how additional applications will affect your credit.
“A big mistake many consumers make is to turn right around and apply with another issuer,” says Best. “What’s important to understand is, if you’re declined for a balance transfer from one issuer, you’re likely to be declined by another.”
Too many hard inquiries in a short period of time can drop your score by as much as 5 points each time, says Best, and you’re better off working on improving your credit before applying again.
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