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Your Credit Application Got Denied – Now What?

April 29, 2022

Whether you’re applying for a credit card, mortgage, or personal loan, your application may have been denied for a few different reasons. Maybe your credit score isn’t where you’d like it to be, or you don’t have an established history yet.  

The latter can be particularly frustrating since it becomes very difficult to build credit if no one will approve your application to start. 🤔 Luckily there are a few things you can do if you're new to using credit and need help building up your credit score for a new application.  

Option # 1: Try a secured credit card 💰

Getting a credit card when you’ve never had one before can feel like a chicken or the egg problem. If a lender won’t extend you a line of credit because you’ve never had credit before, then how are you supposed to get started? This is where a secured card can come in handy.

What’s a secured card?

A secured card is a credit card that requires you to fund it with your own money, that the lender can use in the event you don’t meet your payments. The cash is what makes the card “secured”; different from a “unsecured” card or loan that doesn’t offer any type of collateral (in this case, cash) that the lender would have rights to in the event on nonpayment. The table below outlines different types of secured vs. unsecured debts.  

Unsecured vs. Secured Debt

Secured debt and collateral Unsecured debt
Secured card – cash 💸 Credit card 💳
Mortgage or Home Equity Loan – your home 🏡 Student debt 🎓
Secured business loan – assets 💵 Medical bills 💊
Auto loan – your car 🚗 Personal loan 🤑

The money you give upfront acts like a security deposit in the event you don’t make your payments. Because the card is backed by your own money, there is less risk to the lender, and therefore they are more likely to extend you a line of credit. This enables you to build your credit history a good one so long as you make your payments on time!  

Did you know?

Payment history is the largest factor in your credit score, making up 35-40% depending on the scoring model. This means it’s extra important to make any payments on time!

Once you have the secured card, you’ll use it as a credit card and make payments with funds, separate from the money you gave to the lender initially to establish a credit history. If you have an existing credit score but it isn’t where you’d like it to be, a secured card can also be helpful in repairing your credit history by proving your ability to make payments on time.  

Option # 2: Get yourself added as an authorized user 👯

But only if the owner of the account also has good credit!

Another option to help establish or rebuild your credit history if you can’t get approved for a line of credit yourself, is to get yourself added as an “authorized user” to the account of someone you trust.

For example, if you know a family member that uses a credit card, it may be possible for them to add you as an authorized user to their account. Adding an authorized user does not impact the primary user’s credit score (so long as the credit is managed well moving forward) and would give you access to your own card to begin spending and making payments on to build your history. But there is a catch...

It is very important the primary user adding you to their account has a strong credit history, otherwise you’ll link yourself to poor credit, having the opposite effect you want. Therefore, before making this decision, you might consider asking your friend or family member to check their credit score. Regardless of the scoring model, a score above 600 is usually considered fair, while a score above 660-670 is considered good, and above 780-800 excellent. To learn more about what’s in your credit score, click here.

Your friend or family member can check their credit score for free using Truebill or by visiting www.freecreditreport.com.  

Option #3: Report your rent and utilities 🔌💦

Through Truebill’s partner Level Credit, you can get a leg up in establishing your credit by reporting things you already pay for, like rent, water, gas, and/or your cellphone bill. While this information isn’t usually collected by the three major credit reporting agencies, Level Credit will have you link a bank account and do the reporting for you. This allows you to establish a credit history without worrying about making additional payments. Further, for a relatively low fee, Level Credit can even add up to 2 years' worth of previous payments 🎉 helping you to build up your credit history ASAP.  

True for false?

An individual checking their own credit will impact their credit score.

Answer: False! An individual checking their own history is considered a “soft pull” and does not impact their score like a “hard pull” would from a potential lender.

Option # 4: Consider a store card (as a last resort) 🛍

Because Truebill wants to help you save money, this isn’t our favorite option for establishing credit, but it is one option to consider if the others aren’t building up your history fast enough. Further, store-based credit cards, while generally easier to get approved for, also usually come with higher interest rates, making it even more important to stay on top of your payments. If you do decide to use a store card, all else equal (interest rates, fees, etc.), pick a store that you would generally go to for essentials anyway, so you’re not tempted to spend money on things you don’t need like clothes or entertainment.  

Truebill tip

Set up automatic payments, calendar reminders, or an alert on your phone to avoid any late payments, interest charges or fees associated with your credit.

When managed correctly, credit can be an important and useful tool on your financial journey, whether that’s to buy something you need or finance a large purchase, like a home. Whichever option you choose, we hope this information is helpful in building or improving your credit, so you can get approved for the best possible offer moving forward.