Home > Credit Cards > Help! I Was Rejected for a Secured Credit Card

Comments 2 Comments

A secured credit card can be an excellent tool for building or rebuilding credit. You place a security deposit with the issuer and get a credit card with a credit line that is often equal to the deposit. Because the issuer holds the deposit as collateral in case the balance isn’t repaid, these cards are available even to consumers who have no credit or bad credit. 

But what if you can’t even get a secured card? Our reader Dave, who declared bankruptcy and has $75,000 in student loan debt, says he’s been turned down for one. Another reader, Cathy, was turned down for the secured card she tried to get after her bankruptcy. And Bella says she can’t get a secured card, thanks to her ex-boyfriend who stuck her with a cellphone she got in her name for him. 

Why can’t these consumers get even a secured credit card? 

First, it’s important to understand that every secured card issuer is different and they set their own requirements for approval, which may include a variety of factors. But they will probably require at least three things from applicants: 

  • an income that can be verified;
  • a demonstrated ability to repay the debt;
  • funds for the required deposit.

The first two requirements originate with the government. In the case of the first one, the issuer must comply with the U.S. Patriot Act which requires financial institutions to “implement reasonable procedures for verifying customer identities, maintaining detailed customer records, and consulting lists of known or suspected terrorists or terrorist organizations when opening new accounts.”

The second requirement comes out of the Credit CARD Act, which requires card issuers to verify that an applicant for a credit card has the ability to repay the debt. Issuers may handle that requirement differently. For example, to get a Capital One Secured MasterCard (which was named one of the Best Secured Credit Cards in America), the applicant’s monthly income must exceed their monthly rent or mortgage payment by at least $425. 

Applicants for First Choice Bank’s primor Secured Visa Gold card simply need to certify that their monthly income exceeds their monthly expenses by $100 or more, says Richard J. Miktus, senior vice president of First Choice Bank. “As long as income outpaces expenses (by that amount),” this factor shouldn’t be a hurdle, he says.

Will Bad Credit Stop You? 

A very bad credit score doesn’t necessarily mean you can’t get one of these cards. There is no credit check for the primor card, for example. So credit reports or credit scores are not even a factor. 

When a consumer applies for a Capital One credit card of any type, their credit history will be reviewed, but the secured card “is designed for people looking to build or rebuild their credit,” says Capital One spokeswoman Amanda Landers. This may include “people who may have defaulted on a loan or have been declined for a credit card in the last three months,” she wrote in an email. Among other requirements, applicants “must not have a non-discharged bankruptcy that is still unresolved,” she says. 

Turned Down?

If you are turned down for one of these cards, be sure to read the letter that you receive explaining why your application was rejected. If your credit report or credit score was a factor, by law the lender must tell you and give you the score that was used, along with instructions for ordering a free copy of your credit report from the agency that supplied one to the lender. (This disclosure is in addition to the free annual credit reports you are entitled under federal law so take advantage of it.)

It may make sense to try again, and apply for a secured card with less stringent requirements.

If your problem is lack of income, keep in mind that for the most part issuers allow you to count all income that is available to you to pay the debt, including your spouse’s or parent’s income (if they help support you) or the money you receive from child support, alimony or welfare benefits if you choose to report them.

Rebuilding Credit With Secured Cards 

A secured card that reports your payment history to the major credit reporting agencies on a regular basis can help you build a positive credit reference, which in turn can help you build or rebuild credit. (Most report accounts monthly — but double check before you apply). 

Besides paying on time, which is the most important credit score factor, try to keep your balances low on your secured card. Credit scoring models compare your credit limits to the balances that appear on your credit reports, and credit and balances that total more than 20%-25% of your available credit can hurt your credit scores. Since credit limits on secured cards are often relatively small, you may need to limit your purchases or pay your balances quickly — before the statement closing date— to keep the balances reported to the credit bureaus as low as possible. Paying your balance in full each month won’t hurt your efforts to build good credit.

You can track your progress building or rebuilding your credit scores using free tools. You can get two of your credit scores for free each month on Credit.com along with an action plan for your credit. For many, a secured card can be one of the easiest ways to build credit.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

At publishing time, the Capital One Secured MasterCard and primor Secured Visa Gold card are offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment.

More on Credit Cards:

Image: istock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Sadie

    What if they denied my request for a secured card due to “insufficient funds”? I put down $400.

    • http://www.credit.com/ Credit.com Credit Experts

      Call and ask what they meant by that and what you would need to do to qualify. Sometimes you can appeal a rejection, too.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team