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Credit Card Basics

How Can I Get Approved for a Credit Card After Making Late Payments?

Dear Experian,

How long do I have to wait before getting approved?

- MTS

Dear MTS,

Late payments, especially recent ones, can have a major negative impact on your credit scores. If you had late payments as recently as four months ago, that could certainly be one of the reasons you are being declined.

Pay Attention to Risk Factors

When your credit card application is turned down for reasons related to your credit, the lender will provide you with what's called an adverse action notice, also called a declination letter. The notice should list the reasons you were denied, as well as the credit report and score used to make the decision and when it was calculated.

Pay close attention to why you were denied as it will help you determine what you can do to improve your credit scores going forward. The notice will also include up to five risk factors affecting your credit score. For example, "balances too high on revolving accounts" lets you know that paying down your credit card balances may cause your scores to improve. If "length of time since last delinquency" is listed as a factor, it means your previous late payments will begin to impact you less as time goes on if you continue to make all your payments on time.

How Long Do I Have to Wait to Be Approved for Credit?

If you've already brought all your past-due accounts current, you are on the right track to rehabilitating your credit. However, as you're finding out, it may take some time before your credit scores rebound and lenders are willing to approve you for new credit.

How long you will need to wait to be approved depends on the lender you are applying with and their criteria. It will also depend on the account terms you are willing to accept. Some lenders may be willing to approve you sooner than others, but the interest rates and terms may be less favorable than you'd like.

Order Your Free Experian Credit Score

Aside from adverse action letters, you can get a list of your risk factors any time by ordering your free credit score from Experian. Although there are many different credit scoring models available to lenders, the factors that go into them tend to be similar.

Keeping track of changes to your credit scores and your risk factors can be a helpful tool when you are working to rebuild your credit.

Don't Apply for Credit Too Often

It may seem counterintuitive, but a preapproved offer of credit is not a guarantee that you will be approved once you submit your application. Lenders send preapproved credit offers to consumers who meet their criteria, but you still can be rejected if your credit history has changed since the offer was made.

The process of identifying those who qualify for an offer, preparing the mailing list, sending the offer and having it returned can take several months. By the time you respond to a preapproved offer and submit an application, you may no longer meet the lender's criteria.

It's also possible that you may be declined for reasons that have nothing to do with your credit history. For example, lenders may request your income information or ask you about the length of your employment as part of their screening process. Ultimately, the lender's decision is made once you accept their offer and the lender requests your current credit report and credit score.

Although inquiries tend to have only a small impact on credit scores, it's best not to apply for credit too often. If you have had multiple applications for credit within a short period of time, those inquiries could become a factor in your credit scores. In your situation, it may be best to wait at least a few months before applying again.

Ways to Improve Your Credit Scores

Since payment history is the most important factor in credit scores, it's critical that you continue making all your payments on time going forward. Here are several other ways to begin improving your credit:

  • Reduce credit card balances: The second most important factor in credit scoring is your credit utilization ratio. Also called your balance-to-limit ratio, utilization ratio measures how the total of all your credit card balances compares with the total of all your credit card limits. The lower your utilization ratio, the better for your scores.
  • Pay off any collections or charge-offs: If you have any outstanding collections or accounts that were written off as a loss, paying them off can help improve your creditworthiness.
  • Sign up for Experian Boost : Experian Boost is a free tool that allows you to get credit for your on-time cellphone, utility and other payments. If you make monthly phone or utility payments through your bank account, you can add up to 24 months of those payments to your Experian credit report with Experian Boost.

Thanks for asking.

Jennifer White, Consumer Education Specialist

This question came from a recent Periscope session we hosted.