What to do if you’re denied a secured credit card

A secured credit card can be a great tool to help you build credit—especially if you’re establishing or rebuilding your credit history. A secured credit card requires an upfront cash deposit to open the account. The deposit provides security for the card issuer in case the cardholder falls behind on payments.

While secured credit cards are usually easier to qualify for than unsecured credit cards, card issuers might turn down applicants who don’t meet certain requirements. Look at why you might be denied a secured credit card and learn how you can improve your credit scores before reapplying.

What you’ll learn:

• You may be denied a secured credit card for various reasons, including a lack of credit history, low credit score or no verifiable income. 

• If you’ve been denied a secured credit card, working toward increasing your credit score can help improve your chances of approval if and when you decide to reapply. 

• You can begin to improve your credit score by paying your bills on time, limiting the amount of credit you apply for, using credit responsibly and monitoring your credit score.

When it comes to secured credit card applications, every credit card issuer sets its own criteria for approval and will usually explain via written notice why an applicant has been denied. 

Below are some of the reasons a card issuer may turn down an applicant for a secured credit card:

• Lack of credit history: While secured credit cards are designed for people with poor credit, card issuers may still set minimum requirements. Applicants with no or poor credit history may need to work on building credit first.

• Low credit score: You might have an established credit history but a low credit score. If you don’t meet the card issuer’s credit score requirements, the issuer might turn down your request for a secured credit card.

• Negative information on the applicant’s credit reports: You might not qualify for a secured card if you’re currently going through a bankruptcy, you’ve previously charged off credit accounts or you’ve missed credit card payments. 

• The applicant is unable to pay the card’s deposit: You’ll often need to have a bank account to fund the deposit that’s required to open the secured card deposit. And you’ll have to have enough money to cover the deposit. If you don’t have a bank account or can’t cover the security deposit, you might have to wait until you have a bank account with the necessary funds before applying again.

• No verified income: Lenders are required to check your “ability to pay” before opening a credit line for you. If you don’t have income or don’t earn enough to cover the monthly bill, the card issuer might deny your application.

After being denied a secured credit card, one of the first things to consider is how to improve your credit profile before reapplying.

Here are some tips to help you improve your credit so you can eventually reapply for a secured credit card:

Paying your bills on time is one of the best ways to build a good credit history and improve your credit scores. If you’re having trouble staying on top of your bills, try setting reminders or using automatic payments. Just be sure you have money in your account when the payment is scheduled.

If you apply for multiple credit cards and loans over a short period of time, lenders may incorrectly think your financial situation has changed for the worse.

If you have a trusted friend or relative with good credit, they might be willing to add you to their credit card account as an authorized user. This means you get your own card to use for purchases and other transactions. Some credit card companies, like Capital One, also provide online access to authorized users.

And if the card issuer reports authorized user account activity to the credit bureaus, responsible credit habits could help you build credit. Just keep in mind that negative actions, like missed payments, could affect both the primary cardholder and the authorized user.

Credit-builder loans work a little differently than other types of loans do. Instead of receiving money upfront, the lender puts it into a savings account for you. Then, as you make payments every month, the lender reports your account activity to the credit bureaus. Once you’ve made all the payments on time, you’ll get access to the money in the savings account.

Keep in mind that there may be fees associated with a credit-builder loan. And a credit-builder loan won’t help you build credit if you miss payments or pay late. If you make a late payment or miss a payment altogether, your lender will likely report it to the credit bureaus. And that could hurt your credit scores.

If you’re trying to improve your credit before reapplying for a secured credit card, regularly monitoring your credit and credit limit can help you keep track of your progress. 

One way to monitor your credit is to use CreditWise from Capital One. CreditWise is a free tool that allows you to access your TransUnion® credit report and VantageScore® 3.0 credit score—without hurting your score. And it’s free for everyone, not just Capital One cardholders. 

Checking your credit reports can also help you stay on top of your credit. Just visit AnnualCreditReport.com to learn how you can get free copies of your credit reports from all three major credit bureaus.

Being denied a secured credit card doesn’t mean you’ve run out of options. Start working toward increasing your credit score by developing good habits like paying your bills on time, limiting the amount of credit you apply for and monitoring your credit scores. Using credit responsibly can also help raise your scores.

Compare secured and unsecured credit cards from Capital One and see if you’re pre-approved for credit card offers—without impacting your credit