Is there anything more embarrassing than being denied credit?
We have all been there (well, at least those of us in North America). We apply for a credit card or a loan and we get the dreaded “request denied” response.
And the poor rep behind the counter or on the other end of the line cannot tell us why. Just that we will receive a letter in the mail sometime in the next decade (because the mail has become slower than the pony express days!).
There are a few things you need to do so you can figure out what the next best steps to take are.
There are some things you can do immediately to figure out (1) why you were denied and (2) what to do to ensure a “yes” the next time.
1. Figure out your credit score.
If you have online banking or credit cards, you will probably be able to find your credit score somewhere on the website. Most banking institutions started including this a few years ago. If they tell you, make a note of which formula they are basing the score on- FICO, Vantage, CreditWise, etc.
2. Check your credit reports.
You are entitled to a free copy of your credit report from each of the three major agencies- TransUnion, Experian, Equfax- each year. You can obtain this information directly from each agency or google “free credit report” to find a list of options. Just do your due diligence to ensure it is a reputable site.
Once you have your credit reports, look them over for derogatory items and incorrect information. Dispute anything that you do not recognize or believe is incorrect. You can make the dispute on each credit agency after creating a free log in.
3. Look for credit cards that are looking for you.
If you go to creditcards.com you can look for cards based on credit score, rewards, promotions, or cash back. It will tell you if there are any annual fees.
If you applied for a card that is looking for credit scores higher than yours, you can expect to be denied if you applied.
That said, the higher your credit score, the better the perks so do not purposefully apply for a credit card below your credit score. You could be costing yourself a lot of money if you do.
For those with poor credit scores, ask the bank or credit union where you have your primary checking account if they will offer you a credit card. This is how many people obtain their first credit card… or their “starting over” credit card.
Not all credit card companies follow the rules. Some credit cards targeting poor credit scores have high fees, high interest, poor customer service, and long payment posting times (leading to fees and interest). Google “[the name of the credit card you are considering] credit card reviews” to find what others are saying about the company and its practices.
4. If you have a lot of credit card debt or a history of poor credit choices it may be tempting to go with a debt consolidation or debt reduction company or bankruptcy…
While there are some reputable companies, many will charge you a lot of money to basically kill your credit score. Consider these options of last resort.
If you truly cannot pay your minimum monthly payments or negotiate with your current lenders, do your homework and find someone to work with who has your best interests at heart and will minimize the long-term damage.
Only you can determine the short-term versus long-term effects of paying down your debt versus consolidation versus bankruptcy. Make sure you look at all your options and choose what is best for you.
5. Make a plan.
Once you have all of the information, you can figure out what you need to do to put yourself in a position that you will qualify next time you apply. I will be covering this later this week.
Money Moms take control of their finances and face their challenges head on. If you want to be the mom who has it all figured out (or at least knows where to go to figure it out!), creates a magical childhood for her kids, and is ready for the unexpected, email me to see if the Money Mom Academy is right for you.
The Money Mom Academy is a self-paced program where you can learn as much or as little as you want about money, finances, investing, and money mindset, in both 1:1 and group sessions. It is the fastest way to get from where you are now to where you want to be- creating all those magical memories with your loved ones!