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Qualified for a Mortgage, Rejected for a Credit Card. Huh?

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I recently heard about a consumer who, nine years after declaring bankruptcy, qualified for a mortgage. Apparently her financial life was back on track, but when she later applied for a credit card, she was rejected.  The consumer guessed it had to do with her bankruptcy record, since some bankruptcies stay on your credit report for up to 10 years. But then why would a bank approve her for a mortgage?


I tapped Tom Quinn, our resident credit expert for some additional hypotheses. We don’t know much about this woman’s credit history, other than her bankruptcy in 2002, so a number of factors could have been at play. To really understand the verdict, Tom recommends she request an adverse action letter from the card issuer telling her why she was denied. She is entitled to that.  But bear in mind, Tom says, that owning your home or having a mortgage is no guarantee for increasing your chance of being approved for other credit. “Her recently opened mortgage could have caused her score to decrease, reflecting new, recently taken-on debt and new inquiries,” he adds.  Additionally, “card issuers, along with other credit grantors, have tightened their credit criteria in reaction to today’s higher risk economic environment.”

[Article: Credit Card Q&A-Got Turned Down for a Credit Card After Being Pre-approved]

Well, that explains why I, a home owner with an 800 credit score, was rejected for a Banana Republic store card last year. I know, I know. What was I thinking, right? I am no advocate of store cards, as you may know by my columns. This time, though, I had to cave;  the merchant was offering 30% off my purchase! But alas, I was rejected. It wasn’t until a month later when my adverse letter arrived in the mail that I was told why: In 2004 I had closed an old Banana Republic store card after paying it off in full. And when the card was active, I had been 30 days late once with a payment. As a result, the history of that old card prevented me from being approved for a new one.

I guess it didn’t end so badly. After threatening to put everything back on the rack, the sales manager still went ahead and gave me 30% off. Nice!

[Resource: Get your free Credit Report Card]

Image: hobvias sudoneighm, via Flickr.com

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