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.


All Comments
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Helpful to 188 out of 195 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.

Comment by
Nicksterdemu

4 Contributions
188 People Helped
Helpful to 55 out of 59 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!

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Reply by
BungalowMo

70 Contributions
288 People Helped
Helpful to 7 out of 12 people

Lve it thanks for the advice. DKYMG

Reply by
hanaleikanai

5 Contributions
13 People Helped

Excellent feedback

Reply by
goldie716

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
mommashouldknowbetter44

1 Contribution
0 People Helped

Thank you very much!!

Reply by
diegosconza

1 Contribution
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Helpful to 8 out of 8 people

 I have 5 credit cars. 2 with zero balance & 2 with balances but they are zero percent cards which will be paid in full before intro rate increases. I only have 1 CC that I pay interest on,12% & this will be paid off in August. Recently I applied for USAA pre-approved & was denied, although my fico score was 701 ? I don't get it. My credit util.is 32% & always pay before due date & much more than the minimum payment. Was I wrong to get 2 zero percent cards, which saves me over $166 in interest per month. Maybe I'm missing something. Any suggestions ?  Thanks.

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Comment by
sav825

169 Contributions
242 People Helped
Helpful to 1 out of 1 people

Hi, the USAA credit cards are for people who have served in the military.   Then it gets pass on.  So don't think it's your credit.  

Reply by
Epwoodside

1 Contribution
1 Person Helped
Helpful to 13 out of 14 people

  I ruined my credit when I was in my early 20's.  I started rebuilding it approx. 2 years ago.  I have two auto loans ( a bike, and a chevy truck).....Have made perfect payments on everything since I started trying to rebuild my credit "file".  I since have 3 credit cards, with a total limit of 2500.  I had a couple of cards 20 years ago that I charged up to around 2000, and never paid them,  sorry to say because of my ignorance of how important having good credit was, and is.  Unless you are wealthy and dont need credit to make purchases like auto's and home mortgages,  you will never get where you want to be without having great credit.  What I would like to ask is if I happen to apply for credit with one of the companies that I screwed 20 years ago, can they post any old information on my credit reports that will be detrimental to my efforts in rebuilding it?  As of right now, I have a perfect credit history with not a late payment to anyone for almost two years.  I really want to keep going in the right direction, and would hate to do something stupid, which would give some company the right to share some of my bad credit habits from 20 years ago?   Would appreciate any comments or info......Thanks 

Comment by
kposton71

1 Contribution
13 People Helped
Helpful to 12 out of 13 people

I just ask the same tpye of question.  Have you gotten anyone to reply to you? here was my question;      "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
SonnyHoney54

42 Contributions
171 People Helped
Helpful to 25 out of 29 people

Most of the factors listed (credit utilization, inquiries, credit history etc) are the same ones that go into computing one's credit history so this statistician's analysis would appear a 'double whammy'. What is unsaid also but sadly true is that credit issuers would prefer to go after the most 'profitable' customers. These are typically the ones who rely heavily on credit, making good use of their available credit and making regular interest payments whilst also managing to avoid delinquencies. What they won't tell you also is that if you are the type who uses credit sparingly and pays off balances before they can accrue interests (like me), you are least profitable and consequently of little use to them.

Comment by
larryjay2000

4 Contributions
25 People Helped
Helpful to 9 out of 10 people

Good Article.

Comment by
teddyrowe

1 Contribution
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Helpful to 4 out of 4 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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Comment by
SonnyHoney54

42 Contributions
171 People Helped
Helpful to 8 out of 10 people

My credit report shows I have an old CC account where the "pay status" is listed as "unrated" and the "responsibility" is listed as "undesignated".  Any insight as to what those designations mean?  The account is not listed in the adverse section of the report.  Should I contact the lender and attempt to start making payments?

Comment by
gatorsinlaw

1 Contribution
8 People Helped
Helpful to 5 out of 6 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?

Comment by
Justinwade78

1 Contribution
5 People Helped
Helpful to 10 out of 11 people

Wells Fargo has a good secured program.

Reply by
slimken

1 Contribution
10 People Helped
Helpful to 8 out of 9 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
jasmind1

2 Contributions
10 People Helped

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!

Reply by
Rcmax

1 Contribution
0 People Helped
Helpful to 5 out of 6 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

Comment by
taximan43

6 Contributions
146 People Helped
Helpful to 5 out of 6 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
navymom201

3 Contributions
7 People Helped
Helpful to 5 out of 6 people

 When I paid off the balance of my 2nd mortgage, my score plummeted. I would think that having paid off a mortgage would increase your score because it demostates that you did manage your debt.

I also think that if one has had difficluty with managing credit card debt in the past, they should reconsider getting a any bankcard again (secured or unsecured). Would you advise an alcoholic in recovery to hang out at the bars?

And I think that bankcards are riskier than a store charge in that you can charge nearly anything anywhere . I say before you step back into the fire, you should be aware of your weaknesses. And bankcard issuers are much like pushers. They have done much research into how to market these products to maximize their profits.

But, there are those consumers who can manage their credit wisely. At the same time it just seems insane to see consumers wanting to increase their credit score to obtain a credit card or to obtain a credit card to increase their credit score.

A good history of paying installment loans and auto loans can also increase your credit scores. If you must, save $1000 and take a secured loan out against it. It can also hae a favorable impact upon your credit.

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Comment by
JohnHoer

89 Contributions
57 People Helped
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