7 Screening Methods Credit Card Companies Are Using

The Chase 5/24 rule is one way your application might be nixed.

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:

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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.

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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.

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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.

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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

Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone and have not been endorsed by American Express.

Editorial Note: This content is not provided or commissioned by the bank advertiser. Opinions expressed here are author’s alone, not those of the bank advertiser, and have not been reviewed, approved or otherwise endorsed by the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program.

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About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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