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Even with high credit score, some card applicants rejected

Summary

How can someone with an 800+ FICO score be denied a new credit card? It may have to do with rewards card churning, but the first thing to do is ask the issuer that is denying your application

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QuestionDear Cashing In,
I signed up for an American Express card that offered a 30,000 point sign-up bonus. I had to spend $3,000 within 30 days to get the points. I did this, used the points and canceled the card. I have 40 years of solid credit, have no debt, and my FICO is 821. After the above, I signed up for two more cards with perks and both were denied. How can I find out if the American Express card is causing the issue? — Jake

AnswerDear Jake,
It is hard to know for sure why applicants are approved or rejected for credit cards. Credit card companies have this process down to a science. Their algorithms examine data including credit score, payment history, available credit used, income and so on. But they don’t necessarily tell you why they’re rejecting you.

I put your question to an American Express spokeswoman, who said: “While I can’t shed light on this particular instance, I can tell you that when making a decision on an account, we consider a variety of factors: spending and payment history with American Express, debt with other lenders, reported income, credit bureau scores and other credit report information.”

As you point out, it is also possible that American Express is making a business judgment that you are not likely to be a profitable customer. It is not clear from your question whether the additional two cards you applied for were American Express cards, but if they were, it could very well be that American Express views your history with them unfavorably. This can happen if you have a history of quickly opening and closing accounts. That’s called churning, and while flitting from card to card, scooping up sign-up bonuses along the way, makes perfect sense for a consumer, it could make you less attractive to those doling out those rewards. They’d rather you not churn, but stick around so they can make money off your ongoing borrowing and spending.

The first thing you should do is call and talk to a representative of the bank issuing the card you want. If the rejection was recent, you can ask the bank to reconsider your application. Sometimes, getting an actual person on the line can help if, say, the bank needs more information to properly consider you for a card. The representative might be able to shed some light on why you were rejected.

If that doesn’t work, you’ll probably want to obtain a copy of your credit report — not just your score, but the full report. You can get three reports at no cost every year (one from each of the major credit bureaus, Experian, TransUnion and Equifax) from annualcreditreport.com. You should check them for inaccurate information that might be causing banks to look at you in the wrong light. If you find any, you can dispute the errors to get them cleared from your credit reports.

After that, there’s no quick and easy answer. Just be sure to practice solid credit management techniques. For instance, don’t get in the habit of quickly opening and closing accounts for the purpose of harvesting sign-up points or frequent flier miles. One consideration for card issuers is the average length of time you have had credit card accounts open, so be sure to keep some accounts open for a while — preferably ones with no annual fees.

Jake, it sounds as though you’ve been wise with credit, and I can see why you’re perplexed. Good luck getting the answers you need.

See related:Credit card churning: not a game to play while house-hunting, Churning crackdown worries credit card rewards chasers

 

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