Sometimes I hear from people who have been rejected for a credit card or other type of loan despite having a high credit score. The ones who feel the most frustrated are those who know someone else that got approved for the same card with a lower credit score. How can that be? Why would a credit card company turn down a person with better credit and approve someone with lower credit?
There are three possible reasons (or at least three that we consider the most likely):
#1. Too Much Debt
It’s completely possible to build up a good credit score while accumulating debt. If you continually pay your bills on time while spending more than you pay back, you will go further and further into debt while getting all sorts of goodwill for on-time payments. After all, payment history is the Number One factor in determining your credit score, so if you only make minimum payments, your score may still increase over time.
However, when your debt reaches a certain level and you apply for new credit, a card issuer may look at your debt and say “No way.” Sure your credit score is good, but to that credit card company your debt makes you look like a bomb about to explode, and they’d rather not be the ones hurt when your financial world falls apart.