Even with high credit score, some card applicants rejected
Churning reward cards can lead to problems opening new accounts
Ask a question.
Dear 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
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.
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.
- Rewards redemption options when a relative dies – When a credit card holder dies, heirs have more options for redeeming rewards points than what is stated in the card's terms and conditions. Here's what you can do ...
- Have unused miles and don't fly often? You have options – Have thousands of miles on your frequent flyer account and don't fly often? You can redeem them for hotels, car rentals and even gift cards – without having to transfer them to another loyalty program ...
- Earning travel rewards while living abroad: How 'travel' is coded – You can earn travel rewards on your credit card while living abroad as long as your purchases are coded as "travel." Here's what to look for in a card to earn travel rewards while overseas ...