7 Screening Methods Credit Card Companies Are Using
Written by
John Csiszar
Edited by
Megan Feranda
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Update: Some offers mentioned below may have changed or are no longer available. View current credit card offerings from our partners at CardCritics here or on the issuer’s website.
Given credit card companies’ huge marketing campaigns, you might think they would offer a card to anyone who applies. The truth is that even if you receive personalized credit card offers, your credit card application will have to go through a screening process.
The Chase 5/24 rule, for example, is designed to prevent credit card churning. If you’ve taken out five credit cards in the previous 24 months, you’ll be denied a sixth. Other companies use restrictions to determine who fits their good customer profiles. Explore the ways companies screen you so you can figure out how to get approved for a credit card.
The 5/24 Rule and Other Credit Card Screening Methods
Some credit card screening methods are listed right on most credit card applications. For instance, an application will ask for your income, which is an immediate way to screen you. A company will use your Social Security number to pull your credit report, which will provide it with information about your credit history.
So when you’re applying for that best rewards credit card, remember that there’s a number of variables credit card companies consider when deciding whether or not to issue it to you. Here are seven screening methods credit card companies use to deny applicants:
1. Sign-Up Bonus Restrictions
Rewards credit cards often come with generous sign-up bonuses to entice customers to apply. For instance, the best credit cards might offer 50,000 points or more if you meet certain qualifications. To prevent people from abusing these offers, some companies, like American Express, allow you to receive a sign-up bonus only once if you apply for a credit card. And Chase will allow you to earn a sign-up bonus only for a particular card once every 24 months.
2. Discretionary Restrictions
American Express now inserts a clause in its applications stating that it can deny or even reclaim sign-up bonuses if it deems you’ve tried to “game” or otherwise abuse the system. For example, the restriction would apply if you downgrade or cancel a card within 12 months after you open it. In addition to denying or reclaiming the bonus, American Express reserves the right to cancel your credit card.
3. Total Credit Card Restrictions
If you have too many credit cards open on your credit report, a company might deny your application. American Express takes this system one step further — you can have only four Amex credit cards open at any one time. Other companies, like Chase, might offer you a total credit line across all cards, which would prevent you from opening more if you’ve reached total available credit limit.
Read: 6 Easiest Credit Cards to Get
4. Income Requirements
Although there’s no specific minimum income amount to open a credit card, the federal government does require lenders to comply with certain borrower income requirements. Specifically, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 prohibits credit card issuers from extending credit without assessing a consumer’s ability to pay. So, a lower income level might put you out of the running for approval.
5. Credit Utilization Requirements
Your credit card utilization is the ratio of your outstanding debt to your total available credit. Experian recommends keeping your credit utilization below 30 percent if you plan on getting approved for any future credit cards. The amount you owe on your credit cards, which includes credit utilization, counts for a significant 30 percent of your FICO credit score.
Learn More: FICO Score vs. Credit Score — What the Difference Means for You
6. Credit Inquiries
Getting new credit affects your credit score, too. When you open a number of new credit cards in a short period of time it’s a red flag for lenders, especially if you’re a borrower with a short credit history. Although opening new credit counts for only 10 percent of your total credit score, applying for a lot of cards over a short period of time will ding your score, which might be a reason a lender would deny your application.
7. No-Bankruptcy Policies
Some financial services firms won’t issue credit cards to applicants with bankruptcy filings on their credit reports. Check your credit report to see if a past bankruptcy is still lingering and preventing you from opening new cards.
Why Credit Card Issuers Screen
Credit card issuers can use a number of factors to deny you a credit card. The measures they take, however, are designed to protect them from financial loss. Customers who churn credit cards for their rewards and don’t use them for regular purchases can cost a card issuer money, and cardholders who can’t pay back their debts are also money-losers for credit card companies. Screening methods are in place to prevent these two types of consumers from opening cards in the first place.
Learn More: Credit Card Companies That Offer High-Yield Savings Accounts
All information about American Express card offers have been collected independently by GOBankingRates and have not been reviewed or approved by American Express. These offers are not available through GOBankingRates.
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by American Express. American Express credit card products are not available through GOBankingRates.com.
Editorial Note: This content is not provided by Chase. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by Chase.
