At O1ne Mortgage, we prioritize consumer credit and finance education. If you’ve recently been denied for a secured credit card, don’t worry. There are steps you can take to understand why and improve your chances of approval next time. In this article, we’ll explore the reasons for denial, how to improve your credit score, and alternative ways to build credit.

Find Out Why You Were Denied for a Secured Credit Card

If you’ve been denied credit due to information found on your credit report, the lender is required by law to send you an adverse action letter. This letter will explain why you were denied and the rights you have as a consumer, such as the ability to get a free copy of your credit report.

Common reasons for denial include:

• Inability to demonstrate an ability to repay debt: Lenders must assess your ability to repay any debt you incur on a credit card. If your income is insufficient, even having enough money for the deposit won’t be enough to get approved.
• No verified income: If you claim income on your application, you may need to provide documentation. If you can’t verify it, your application can be denied.
• Insufficient deposit: The typical minimum deposit for a secured card is usually $200 or $300. If you don’t meet that deadline, the card issuer won’t open your account.
• Certain negative items on your credit report: Major negative items like bankruptcy, collection accounts, repossession, and foreclosure can lead to denial.
• Very low credit score: While secured credit cards are accessible for people with bad credit, card issuers may still have a minimum credit score requirement.
• Inaccurate information on your application: Typos or incorrect information can lead to denial. Carefully review your application before submitting.

How to Improve Your Credit Score Before Applying Again

If you get denied credit, you may be tempted to immediately apply for a different card. However, each application results in a hard inquiry on your credit report, which can decrease your credit score. To avoid hurting your score too much, take some time to improve your credit before you apply again. Here are some tips:

• Pay bills on time: Your payment history is the most influential factor in determining your credit score. Make it a goal to get caught up on past-due credit accounts and pay your bills on time going forward.
• Reduce credit card balances: Your credit utilization rate—the percentage of your available credit you’re using—is another important factor. Try to pay down your balances. The lower your utilization rate, the better.
• Get credit for rent and other on-time payments: Services like Experian Boost® can help you get credit for on-time payments for rent, utilities, and more.
• Apply for new credit only if you need it: Hard inquiries can make it harder to get approved for credit in the future, especially if you have other negative items on your credit report.

Alternative Ways to Build Credit

Depending on your situation, it may make sense to pursue other ways to build credit, with or without a secured credit card. Here are some to consider:

Credit-Builder Loan

A credit-builder loan is a type of installment loan specifically designed to help you establish a positive payment history. Unlike other installment loans, which provide the loan proceeds upfront, credit-builder loan providers deposit the funds in a savings account. You’ll make payments over a set term, and when the term is over, you’ll receive the loan funds to use as you wish.

Authorized User

If you have a parent or other loved one who manages their credit well, consider asking them to add you as an authorized user on their credit card account. The account’s payment history will be added to your credit reports. This option only makes sense if the primary cardholder uses the account responsibly.

Review Your Credit Reports

Take some time to review your credit reports to see if there are additional areas you can address. You can check your free Experian credit report anytime, and also get a free credit report weekly from Equifax and TransUnion through AnnualCreditReport.com. Watch out for anything you don’t recognize and file a dispute if you find inaccurate details.

Monitor Your Credit to Track Progress

As you work on building your credit history, Experian’s free credit monitoring service can help you keep track of your improvements with a FICO® Score powered by Experian data. You’ll also get real-time alerts when new inquiries and accounts get added to your credit report.

Contact O1ne Mortgage for Expert Mortgage Services

At O1ne Mortgage, we are dedicated to helping you achieve your financial goals. Whether you need advice on improving your credit score or are looking for mortgage services, our team of experts is here to assist you. Call us today at 213-732-3074 for any mortgage service needs. Let us help you navigate the path to financial success.