Credit Card Approval Insights

Credit Card Approval Insights

Each week, we receive dozens of questions about applying for loans and credit card. The most common question involves why a member was declined even though their credit score appeared high enough for approval based on the credit scores of other members who were approved recently. With so much confusion, we thought it would be helpful to dig into the data and answer the question in more detail.

The first thing consumers should understand is that the underwriting process, the rules that determine whether a consumer gets approved or declined for a credit card, is the secret sauce of credit card companies that determines the profitability of each cardholder, the credit card portfolio, and in many cases the entire business. The underwriting process is responsible for the amount of risk credit card companies take on and how well they can predict the performance of consumers they approve to become cardholders. A difference of a 5% customer charge-off rate to a 10% customer charge off rate in a credit card portfolio can be worth hundreds of millions of dollars to the credit card issuers. As such, you can imagine lots of money is spent refining the logic of the underwriting process, testing new logic, and protecting that logic from competitors.

With so much to gain and so much to lose for credit card companies, it's easy to understand that a credit score alone is not sufficient to determine approvals or declines for credit cards. So, what other factors are used to determine which consumers will be approved and which will be declined? To answer that question, we spoke to an anonymous credit card statistician who has built these formulas for the past 15 years. He shared there are 6 other leading factors, in addition to credit score, that will determine a consumer's likelihood to be approved for a credit card.

  • Credit Card Utilization. Just like with your credit score, the amount of available credit you use can have an impact on your credit card approval. Simply put, if your existing credit cards are maxed out, you may be more risky than someone who has the same exact credit score who is not maxed out.
  • Recent Hard Inquiries. In many respects, you can think of recent inquiries as a sign of desperation which we can all agree is probably a bad risk for any lender to take on. If you have several recent inquiries, it suggests that you either didn't get the credit you requested (denied, a negative factor) or you did get the credit and it wasn't enough to meet your needs (another negative factor).
  • Age of Oldest Trade. The ability to maintain accounts in good standing speaks volumes about the borrower. Lenders like to see a long history of open accounts, which in many cases means more than 2 or 3 years. While you can argue 2-3 years is a strong indicator of creditworthiness, it is still a short time frame from a lender's point of view. In those 2 or 3 years, you probably haven't been laid off, gone through a recession, or experienced many major life events. On the other hand, if you have 10 years of credit history and maintained your accounts, it says a lot about your level of responsibility and financial management. On a side note, if a consumer has few accounts or a very short length of credit history, it is often called a "thin file."
  • Number of 30-Day Delinquencies. Fool me once, shame on you, fool me twice, shame on me. That, in many ways, is how lenders feel about delinquencies. If you have a habit of paying late regardless of your score, be prepared to suffer the consequences when it comes to credit approval. Delinquencies, even minor ones, are a red flag for lenders. That is why you should ALWAYS pay bills on time.
  • Presence of a Mortgage. Owning a home can actually help you when it comes to underwriting. Mortgages denote stability and suggest that your credit is strong enough to support a high dollar loan. This metric is often a tie-breaker type criterion, so don't get a mortgage just to improve your underwriting probability.
  • Presence of an Installment Loan. Just like a mortgage, installment loans demonstrate the breadth of experience you have with accessing and managing credit. Often, experience with more than just credit cards is seen as beneficial in the eyes of a lender. Installment loans show a level of planning not displayed in credit cards since installment loans have a fixed monthly payment which often require more discipline and budgeting, both of which are often a plus.

This list isn't intended to be inclusive of all the decisioning criteria as the process and models can be quite complicated. Instead, we hope the list sheds some light on the other components that go into approving consumers' loans and/or credit card applications.

When you see the Credit Karma credit card approval score data, also consider how lenders will view you across these metrics as well before you apply. If you barely make the average credit score for approvals, consider applying for a card with a lower credit score requirement. We hope this article helps shed more light on the credit approval engine.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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1 Contribution
76 People Helped

Helpful to 76 out of 84 people

Two of my hard  iquiries are from applying for Credit Karma's recommendations. It makes me leary of applying for anymore of them.

Top Contributor
48 Contributions
245 People Helped

Helpful to 25 out of 28 people

         You wrote about the”6 other leading factors", how about giving some insight into past credit history with a financial institution.      If someone had a credit card 10 years ago and defaulted on the card, will a card issuer give someone a second chance?  The negative information is no longer on the credit report but how harshly is a credit card company going to hold the past debt against you? (I would think they would have a very long memory when it comes to who defaulted on then)  Does a person have any hope of getting a second chance?  Can a credit card issuer legally hold 10 year old negative information against you?

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Reply by
Customer151

26 Contributions
52 People Helped
Helpful to 8 out of 9 people

Credit issuers often give second chances. i got one with exxon, discover, citi, and chase.

Reply by
gibby7333

1 Contribution
8 People Helped
Helpful to 8 out of 10 people

Enter Your ReplyI file bankruptcy chapter 7 back into thousand 11 I filed on capital one on two cards a year ago I was approved for capital one card with a $4000 limitit was a quick silver MasterCard when I recently went to apply for a quick silver visa I was denied and told that because I file bankruptcy I would not be approved however the lady did tell me the reason why is because it's harder to get a visa then it is a MasterCard and MasterCard is ran by a different department then the visa. So to answer your question yes if you filed on the credit card you can get approved again to me the master code seem a lot easier to get no matter what and my capital one MasterCard was at 0% for one year with cashback the great card I love it you might give it a shot. 

Reply by
pacoreed

2 Contributions
8 People Helped
Helpful to 7 out of 9 people

I know you submitted your question a while ago but, I defaulted with CapOne and they charged it off. That was over 7yrs ago. Now I have three CapOne cards, so yes they do forget!

4 Contributions
34 People Helped

Helpful to 14 out of 14 people

KrisKris89, there's no specific number of cards that you should or shouldn't have. The number of cards you have are far less important than how you use the cards you do have.

I would very strongly suggest that you don't close any of your credit card accounts, as others have suggested. This would ultimately hurt your score, significantly. Any credit card account you close will automatically lower your total credit limit, which will raise your utilization rate, and consequently lower your credit score. Even if you have cards that you don't use very much, keep them open and continue to use them every now and then for small purchases.

Also, do not get rid of your store/retail cards. With responsible use, they are just as useful in helping to improve your score as any other card would.

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Reply by
hulkamaniac69

82 Contributions
394 People Helped
Helpful to 11 out of 11 people

Unless the card is issued by First Premier in which case paying exhorbitant fees makes no sense just to keep the card active on your credit file...

4 Contributions
361 People Helped

Helpful to 359 out of 374 people

Good credit is some luck mixed w/hard work. I was almost fifty and had never had a CC in my life. I just renewed my first card after four years, have ten active accounts, dumped three, a credit score well over 750 and have my sights set on 800.

By the way I haven't been gainfully employed for the entire millennium. I constantly lie about an annual salary, yet I've paid every card on time. I've had to shuffle them around so everybody snags a piece of the action and the better ones are used more often.

I originally talked a store into approving a CC for me because I bought from them and they had a record of my purchases. I applied for a lot of cards w/no fees early on. I kept records and asked for credit limit increase every six months.

If I was denied I told them it would be a cold day in hell before I would use their card again and to mark that down in my file. I'd stop using the card and call them six months later and offer them the option to reconsider.

I'm a bum w/40K of credit, but I pay statements in full, early, I read articles, such as this one, in order to form a strategy and I stick to my game plan. I'm done w/shopping for new CCs for a while and have shifted my focus to Store cards where I shop.

Pay your statements when they come in, before they are due. It isn't worth waiting and risking being late. You're already playing on their dime, so appreciate the luxury by being responsible.

Suck it up, sacrifice and save a little bit. If you don't have a savings account all hope is lost. If you can't put some money into a savings account on a regular basis then you don't deserve credit.

Your not worthy! Get a clue. If you're living paycheck to paycheck out of only a checking account/debit card then why would you want credit?

To obtain credit you need to demonstrate proof of some financial discipline. When you receive your first 500, 1000 or 2000 dollar card spend 5-10% every month on neccessities and nothing more. Create the illusion that you don't need the card and keep the utilization low.

After your first card you'll become blitzed w/offers. Accept only those w/no fee and only use up to ten percent of the limit. You need a history of using only a little bit of what's available.

As you continue to demonstrate restraint you will be duly rewarded and you will reinforce the habit ingraining the admirable trait within your personality.

Good Luck.

Top Contributor

Reply by
BungalowMo

82 Contributions
625 People Helped
Helpful to 111 out of 117 people

Well said Nickster!  The only thing I'd like to add is going to the "Opt Out" website & print out that form & send it in.  You will receive NO offers in the mail.  Most are simply hoping you apply, when in reality, their "pre approvals" are bull.  Get that junk out of your mail box, go to the Creditboards website & check out their (gotta create username) credit pulls database.

If you REALLY want to know what your chances are, the detailed information on there is great.  I have checked there every time before I applied anywhere for the last 5 years.

I'll never app without it!

Reply by
alibradiva

2 Contributions
4 People Helped
Helpful to 3 out of 3 people

Thanks for the  advise.  My goal is to pay my credit cards dwn, and out. I am going at them one by one.  Now I am understand the system. 

Reply by
hanaleikanai

5 Contributions
23 People Helped
Helpful to 17 out of 25 people

Lve it thanks for the advice. DKYMG

Reply by
rocnmel20

1 Contribution
0 People Helped

That was some very straightforward, insightful and useful information. You should consider writing a book on this topic.

Reply by
Debit1234

1 Contribution
0 People Helped

excellent advise!!!

Reply by
goldie716

1 Contribution
0 People Helped

Excellent feedback

1 Contribution
0 People Helped

Best respnse ever!!! Thank you for having the cahones to be straight forward!!! Because of your advice and honesty i have decided to "suck it up..Sacrifice and save a little"!!  i will wait until the money is saved to even attempt to apply to one!! thanks for the kick in the rear end and the slap to the back of the head!!! My finances sincerley thank you ......and so does my husband!!! 

Reply by
diegosconza

1 Contribution
0 People Helped

Thank you very much!!

1 Contribution
6 People Helped

Helpful to 6 out of 6 people

Credit is all about how you use it. Rebuilding credit is a lenghty task but it can be done. You have several different options to jump start your credit. Secure credit cards is one, buying  a CD (certificate of deposit) and taking a loan out using the cd as collateral is another. You just have to do your research on the issues you have. Getting a card at a store can help as well.

1 Contribution
4 People Helped

Helpful to 4 out of 4 people

My Experian score is 642 and my Transunion score is at 476. Anything I can do to get a secured card? I messed up my credit as a youngster but I'm looking to make it right.

1 Contribution
8 People Helped

Helpful to 8 out of 10 people

I was taught a great lesson from my father. You will have friends girlfriends ,boyfriends family etc:, THAT WILL LOVE YOU AND HURT YOU...... but the only friend you will have that can buy you clothes,vacations cars houses etc: is your good credit. TAKE GOOD CARE OF IT AND IT WILL GIVE YOU EVERTHING YOU WANT...

1 Contribution
13 People Helped

Helpful to 13 out of 16 people

Im working on trying to rebuild my credit. I have paid everythig up and my score has improved slighty still bad  at 590. I thought about applying for a credit card secured or whatever, to help but dont know if i would just get denied and make things worse. Any ideas?

Reply by
jasmind1

2 Contributions
23 People Helped
Helpful to 21 out of 22 people

Yes, you can apply for a secured credit card. They want to basically test you to see if you will do right. The limit is low, but pay on time for awhile, then you are able to get another card. That will help you with establishing your credit and then can see how responsible you are. Capital One to me is wonderful, then you pay for a whole year, and they add on another $100.00. Good Luck!

Reply by
slimken

1 Contribution
21 People Helped
Helpful to 21 out of 23 people

Wells Fargo has a good secured program.

Reply by
Rcmax

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

In the same situation my kc score is at 581.  Just applied online for the capital one secured credit card?  Gave me an instant approval with a $49 deposit!  Good luck!

2 Contributions
54 People Helped

Helpful to 1 out of 1 people

My credit is undergoing some major disputes and I think I should wait until the reports and scores are corrected. Do you agree? Credit card companies only look at the negative submissions and do not take into account that they may be incorrect. Agreed?

6 Contributions
379 People Helped

Helpful to 12 out of 15 people

Can any one tell me when you apply for credit and you recrived that card that you apply for  remains on your credit report as a hard hit makeing your credit score lower instead of highter

if you have bad credit you have to apply to get credit my score should be about 650 instead of

597 can any one tell me what to do thank you taximanrose43

Reply by
navymom201

3 Contributions
14 People Helped
Helpful to 12 out of 14 people

SAME HERE. I HAVE THE SAME QUESTION. HAD SCORE OF 710 WITH NO CREDIT. COULDNT GET ANY CREDIT. NOW THAT I HAVE CREDIT MY SCORE WENT DOWN TO 600. I CANT FIGURE THIS OUT.

Reply by
philiplawson

2 Contributions
9 People Helped
Helpful to 8 out of 11 people

When you apply for credit of ANY TYPE & that possible provider of the credit "runs/checks" your credit report, that "ding" will be reflected NEGATIVELY on your report & score for a minimum of 90 days.  This will especially be a factor within the first 30 days (1check reduces my score 1-4 points EACH) and when you have more than 3 during your most recent, 30 days.  There is no way to apply for credit (that is reported/based-on your credit score & the creditor checks your personal credit report  following your request for credit and getting your permission to "run" your credit report) and not have a small point reduction in your credit score. . Just VIEWING your score MAY be an exception to getting a Negativve hit! 

Top Contributor

Reply by
kjarrett1991

19 Contributions
15 People Helped
Helpful to 1 out of 2 people

I applied for a credit card not under this site and was denied for no credit history and it took 12 points off my credit score i was not happy about that and it maded me not want to apply for another card but i did apply under this website and was approved for capitol one card and i was happy just check my credit score and it went back up the 12 points i had lost thank you Credit Karma

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