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

Results 81-90 of 107Results per page: 5 | 10 | 25Page 9 of 11   Previous | Next
1 Contribution
0 People Helped

I really want to do whatever I can do to bring up my credit score.  Thank you for giving me this chance.

3 Contributions
6 People Helped

Not helpful done it all but still turned down. I'M NOT THE ONLY ONE WHO GETS ON THIS COMPUTER and are getting credit cards. Edward Bergstrom does too so don't pentllize me for it. My car one more half payment then done.I qoe no one 11,000 not at all

6 Contributions
26 People Helped

I got approved for a capital 1 secure card and my score went from 571 to 587. I got approved for a mid atlantic verve card but because of the 2 hard credit inquries in 3 weeks in went down to 565.

1 Contribution
0 People Helped

My credit score is in the mid 500's. I am trying to rebuild my credit, however when I apply for credit cards online I am denied, however when I go in the store and the clerk talks me into applying, I am approved. Is there a difference in applying online and in the store. I was recently approved for a Kohls card with a 300.00 CL and Belk with a 500.00 CL. Are these cards typically easy to be approved for and should I apply for a couple more cards in store to rebuild my credit with.

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6 Contributions
0 People Helped

Credit card companies do give second chances I had a capital one card when i was 20, i was approved for 300 and got it up to 700. I paid on it for over 2 years then got laid off from my job during the recession and couldnt pay for it. Im 29 now and just applied back in april for the cap one journey card and got approved instantly for $3000.00! My old cap one account was and still is on my credit report when i got approved, its due to come off my credit in a year which is good. I was so greatful cap one gave me another chance ive been paying it every month 2 to 3 weeks early. i made a mistake but it wont happen again...rebuilding my credit feels great and iam also disputing a bunch of medical bills that equal $17,000 that were suppose to be billed to my insurance which never happened and were sent to collections so fast it wasnt funny. Im disputing it all on my own and now im jus waiting for the 30 days they have to make a decision. i had all the proper documents to prove it. So hopefully they will be taken off my report, it would be great.

1 Contribution
0 People Helped

I just applied for the capital one secured card and was denied . I dont get it i am so upset i dont know what else to do i have no credit cards . How does one rebuild if they are not allowed to! I am super depressed i cant get a loan cant get a credit card! i dont know what to do . I really need to find something that can help me.

1 Contribution
0 People Helped

After maybe four years or so of having an open credit line with Chase Mastercard and never having a late payment or any kind of deliquent activity, I absentmindedly went over my credit limit when my car got towed and I didn't have enough cash to cover it. My APR ended up increasing to 32% for one mishap! I had to opt-out. Why would they do that and is there anything I can do?

2 Contributions
0 People Helped

As far as delinquencies, how far back do they look? 7 years?

Varies by issuer.

Review by
CK Moderator

1 Contribution
0 People Helped

I have very poor credit (FICO 570). I filed Chapter 7 Bankruptcy last year and my FICO seems to decline every month. How do I begin credit repair?

2 Contributions
0 People Helped

You know what I realized today??? As hard as you work too improve your credit score. Its never good enough!!!!! It's useless too work your self in a frenzy too prove yourself too these banks, cause it can still backfire in your face!!!You can have a score of 800 with no inquiries no lates, or nothing negative , they will still find something too deny you! Oh dont worry they will come up with something stupid believe me I have seen it happen more than once. Just make your payments on time and keep balances low too avoid and high intrest. and the Hell with everything else...Its not up too myfico. creditKarma, it's up too these no good *** banks!!!!

Reply by
atcabot

4 Contributions
39 People Helped
Helpful to 1 out of 1 people

Don't run the race then. A credit score is just an easy way for financial institutions to tell each other who the easy marks are when it comes to making obscene profits with little or no risk. Pay cash and use a credit union.

Reply by
sonic4031

8 Contributions
0 People Helped

go to a credit union and apply for a card..

Reply by
tannasue

4 Contributions
12 People Helped

AMEN brother!!!!!!!! Do what your grandparents did. Save up and pay CASH for your purchases. If you pay cash for a $1000.00 item, it cost you $1000.00 not $1K plus interest.

Top Contributor

Reply by
tattoo666

13 Contributions
1 Person Helped

Let me tell you something about credit unions. I was looking at buying a new truck and was looking at putting $5000.00 down. I went to the credit union that I had three accounts with for more then eight years and they denied me. I went to the dealership, signed my name and drove out using in house financing. Credit Unions are just like any other bank and they will look at your score, if you were late, how much you owe compared to how much you make and then decide. right now because I am out of work for a medical reason the only thing I could get from the credit union I use now is a secured card. Bad part is I get a monthly check and it is well more then double my monthly bills, not including the wifes check!

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