CardRatings is here for you during these unprecedented economic times resulting from the Covid-19 crisis. Check back regularly for new resources and let us know if you have specific questions related to your credit cards and credit by emailing editor@cardratings.com.

I'm a 22-year-old female who makes about $1,000 a month. I have a credit union credit card with credit line of $500. I recently applied for a Lowe's credit card and was denied. I'm always on time with my credit card payments. What would be the reason?

By , CardRatings Contributor

Our credit card articles, reviews and ratings maintain strict editorial integrity; however we may be compensated when you click on or are approved for offers (terms apply) from our partners. How we make money.

In this era of instant-approval credit card offers, it's easy to overlook the rule that a bank must supply you with a specific reason for declining your application in writing. You'll probably receive a letter from them in a plain envelope that most people might mistake for junk mail. However, based on what you've told me, there could be a few reasons why they might have turned you down:

  • Income. Under federal guidelines, banks must calculate your credit limit based on your ability to repay your entire balance from monthly income. With only $1,000 per month coming in the door, there's not much room for a significant credit limit. Even though your existing credit union credit card is probably helping lift your FICO score, it's going to be hard to convince a lender to extend your available credit.
  • Credit utilization. You didn't mention whether you're carrying a balance on your credit union account, but that could play a role in an issuer's decision. Even though you make payments on time, carrying a balance as large as 30 percent of your available limit could cause some banks to reject you as a candidate.
  • Diversity of lenders. If your credit union account is the only line of credit that prospective issuers see on your credit report, you've got what they call a "thin file." Credit unions, by their nature, can often afford to take a little more of a risk on members who manage share accounts (their version of savings accounts) at the same institution.

All that said, you can take some steps to make yourself a less risky candidate for a retail credit card:

  • Open a secured credit card with another lender. If you can afford to stash as little as $200 in a savings account for a year or two, you can get another major credit card that reports to all three credit bureaus.
  • Pay down any existing balances. Keep your credit utilization as low as possible to assure potential lenders that you're not in danger of getting in over your head.
  • Increase your reported income. Whether you work some extra hours, qualify for an annual bonus, or open up an Etsy store, you'll need to find a way to bring in just a little more cash each year to make a bank feel good about extending you credit.

Remember, at this point in your financial journey, you're just trying to build a credit profile to help you qualify for better mortgage rates, cheaper insurance, and stronger loyalty rewards. Avoid opening retail credit cards if you just intend to spend.


Be the first to comment!

Start Here

Search. Compare. Apply.

Featured Partner Cards