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When you pay your bills on time, don’t max out your credit cards, and focus on building different types of credit, you’re normally rewarded with a good credit score. It may take a while to get there, sure, but the recipe for good credit is mostly the same for everyone.
Your credit score may also matter more than you think, mostly due to the array of benefits that await those with good credit. Not only can very good or excellent credit (scores typically 740 or higher) help you get the best rates on a car loan or home loan, but this status may even help you score lower insurance rates.
Now, here’s the bad news. Great credit doesn’t guarantee you’ll qualify for any loan or credit card you want. This is true even if your credit score is 850, which is the highest score anyone can achieve within the FICO base scoring method.
According to FCRA certified credit expert John Ulzheimer, this can catch people by surprise because they assume perfect credit is the ticket to all the credit they want. Not so fast. There are actually several reasons you can be denied a credit card or another type of loan even if your credit score is sky high.
1. You don’t have an income
As Ulzheimer notes, the Card Act of 2009 requires card issuers to verify an applicant’s income and ability to repay. For that reason, someone without money coming in may struggle to qualify for a credit card or any other type of loan.
This reason for denial is understandable since card issuers want to know they’ll be paid back for any money you charge, but it may be a tough pill to swallow for people with great credit and other positive factors.
However, there’s one way to sidestep this requirement if you don’t earn an income but someone in your household does, says Ulzheimer. Most credit card applications ask for your “household income,” even though many people may be inclined to enter their personal income. If you’re a stay-at-home dad but your wife works, for example, this little detail allows you to list your household income and potentially qualify — even if you’re not earning anything on your own. (See also: 6 Ways to Boost Your Partner’s Bad Credit Without Risking Your Own)
2. You’ve had trouble with credit in the past
Let’s say you have excellent credit now, but it wasn’t always this way. If you had financial issues with a card issuer or lender in the past, but have repaired your credit since then, you may be denied no matter what you do.
“Credit card issuers have a really good memory,” says Ulzheimer. “If you have ever discharged debt in a bankruptcy with them, they will remember — even if you have rebuilt your credit score.” (See also: How to Rebuild Your Credit in 8 Simple Steps)
3. Your credit utilization is too high
Credit utilization is the second most important determinant of your credit health, making up 30% of your FICO score. The more you owe in relation to your credit limits, the more likely your score will take a hit.
Still, Ulzheimer says there is an in-between area where you can be denied a credit card with good credit simply because your utilization is high. While he wouldn’t expect “someone who is highly utilized to have a super high credit score,” people with respectable credit scores are denied credit all the time for this reason.
“When you owe too much, then the issuers don’t want to stack more debt on top of you,” says Ulzheimer. If you want access to more credit, you’ll probably need to pay your balances down. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)
4. Your credit is just “too good”
Ultimately, there are times when people with really high credit scores can be denied credit because they are seen as unprofitable. Maybe a person hasn’t carried a balance on a credit card in years and they also prepay their mortgage religiously. Or, perhaps they have a long history of only carrying a balance on extremely low rate loans, such as a car loan that comes with 0% APR due to a promotion.
“At the end of the day, card issuers are looking for consumers who are going to provide them with revenue or income — not just a good credit score,” says Ulzheimer.
5. You have too many hard inquiries
There’s another reason you may be denied a credit card with really good credit: too many hard inquiries. Ulzheimer says applying for too many cards within a short amount of time is seen as a bad thing since it typically means the consumer is trying to get more credit they can use or applying for rewards cards just to get the bonuses.
If you are trying to access huge amounts of credit all at once, this could look as if you want to rack up balances you never plan to repay. If you’re signing up just for bonuses, on the other hand, it means you’re likely to be an unprofitable customer.
That second part of the equation has become a bigger problem than it used to be over the last few years. Consumers actively pursuing new credit cards for sign-up bonuses have faced a lot more denials from different card issuers who are catching on and trying to deter this strategy.
Signing up for new rewards cards typically means “you’re taking advantage of loopholes and credit card rewards with no plans to use the cards on a long-term basis,” says Ulzheimer. This isn’t illegal, but it does mean card issuers may not want to extend credit to you.