Denied a secured credit card? Here’s what to do next

Secured credit cards are typically easier to qualify for than traditional, unsecured cards. But there are still certain requirements. 

Learn why you might have been denied a secured credit card and how to improve your credit before reapplying.

What you’ll learn:

• Credit card issuers evaluate secured credit card applications based on an applicant’s creditworthiness, income and other factors.

• Reasons for a secured credit card application denial can include lack of credit history, low credit scores, negative information on credit reports and insufficient income. 

• If you’ve been denied a secured credit card, improving your credit scores could help your chances of approval if you reapply.

With secured credit card applications, every issuer sets its own criteria for approval. But all credit card issuers are required to provide adverse action notices to explain why they denied a credit card application.

Here are reasons why a card issuer may turn down an applicant for a secured credit card:

• Lack of credit history or low credit scores: Secured credit cards are typically designed for people building credit, but card issuers may still set minimum requirements for approval when it comes to your experience with credit.  

• Negative information on your credit reports: You might not qualify for a secured card if you’re going through bankruptcy, have previously charged-off credit accounts, or have missed credit card payments. 

• Insufficient income: Lenders are required to check your ability to pay before opening a credit line for you. If you don’t have income or don’t earn enough to cover the monthly bill, the card issuer might deny your application.

• Incorrect information on your application: If your secured credit card application has missing or inaccurate information, it could be denied.

A security deposit acts as collateral and is required to open a secured credit card account. If you can’t cover the secured card deposit, you likely won’t be able to open an account, even if you were approved.

If your application for a secured credit card was denied, you may be able to access credit another way:

If you have a trusted friend or relative with good credit, they might be willing to add you to their credit card account as an authorized user. You could get your own card. Issuers like Capital One provide authorized users with online account access.

If the card issuer reports authorized user account activity to the credit bureaus, responsible credit habits could help you build credit. Negative actions like missed payments could affect both the primary cardholder and the authorized user.

Credit-builder loans work a little differently than other loans. Instead of receiving money up front, the lender puts it into a savings account. As you make payments, the lender reports account activity to the credit bureaus. Once you’ve made all the payments on time, you should get access to the money in the savings account.

There may be fees to open a credit-builder loan. And if you miss a payment, your lender could report it to the credit bureaus, which could hurt your credit scores.

If your secured card application is denied, you may want to wait before reapplying. That’s because applying for multiple cards and loans over a short period could signal to lenders that you’re not using credit responsibly. 

In the meantime, you could consider ways to build credit.

Regularly monitoring your credit could help you keep track of your progress. One way to monitor your credit is to use CreditWise from Capital One. It’s free for everyone, even if you’re not a Capital One cardholder. And using it won’t affect your credit scores.

You can also visit AnnualCreditReport.com to get free copies of your credit reports from all three major credit bureaus.

Being denied a secured credit card doesn’t mean you’ve run out of options. For example, you could consider becoming an authorized user on someone else’s card. Or you might decide that a credit-builder loan makes sense for your situation.

When you decide it’s time to reapply for a credit card, you could first compare Capital One credit cards. You can even check whether you’re pre-approved before applying. It’s quick, and it won’t hurt your credit scores.