I recently applied for a few credit cards. It had been a while since I’d opened one, and I saw some travel rewards cards I liked that were offering excellent sign-up bonuses.
Three out of four applications were approved. The lone exception was Citi, where I got an instant denial. Now, I’ve been denied on credit card applications before, so this wasn’t uncharted territory. But I was shocked when I got the denial letter in the mail and saw why Citi made that decision.
Why Citi denied my credit card application
When a credit card company denies your application, it needs to let you know the reasons in writing. My credit history doesn’t have any glaring issues. I have an excellent credit score, I’ve never missed a payment, and I’m debt-free.
In its denial letter, Citi listed two main factors in its decision to deny my application. Here’s exactly what it said:
- “Your credit report shows a high amount of unused credit compared to your available credit lines.”
- “Your credit report shows too many bank or national revolving accounts.”
The second factor was what I expected. I’ve taken advantage of my high credit score by opening many of the top credit cards. Some card issuers are reluctant to approve people who already have a lot of other cards. The first reason took me by surprise, because it’s usually not considered a problem.
My unused credit got my application denied
Even though I have a large amount of credit available, I use a comparatively small portion of it. I have over $200,000 in combined credit limits across all my cards. I don’t spend anywhere near that much, and I always pay my credit card balances in full.
Those are good habits from a financial perspective. A key factor in your credit score is your credit utilization, or how much of your credit you’re using. By keeping mine low, I maintain a high credit score. Paying my credit cards in full means I stay out of debt, and I never get charged any interest.
While these habits are good for me, they don’t look as good to a credit card issuer. Card issuers make a lot of money from interest charges — over $105 billion in 2022, according to the Consumer Financial Protection Bureau. They also earn money from processing fees when people use their cards.
I may have a high credit score, but I’m not exactly the ideal cardholder. Since I’m careful about how much I spend, Citi was probably doubtful I’d generate much money in processing fees and interest.
A denial doesn’t always mean you’re doing something wrong
If you get denied on a credit card application, your first instinct may be that it’s a problem on your end. Check the denial reasons, because this isn’t always the case.
My financial habits resulted in a denial on my Citi card application, but I’m not going to do anything differently. I’m staying out of debt and saving money this way. It may not work for a credit card issuer, but it works for me. And there are plenty of credit card options, so I’m not going to overreact to one denied application.
You can also call the card issuer and ask for a reconsideration when your application is denied. It’s sometimes possible to get the decision overturned. It’s much better to do that than to start using more credit or getting into credit card debt.