What to Do if You’re Denied a Balance Transfer Credit Card

What to Do if You're Denied a Balance Transfer Credit Card article image.

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Balance transfer credit cards provide borrowers a unique opportunity to pay down their credit card debt interest-free. They typically require good or excellent credit to get approved, however, so they're not a viable option for everyone.

After being denied a balance transfer credit card, there are several other options you can explore. If you were denied due to your credit, you should receive a notice in the mail from the card's issuer explaining why. You can also use information from your credit report to determine your next steps.

Depending on your situation, here are some possible paths forward.

Consider Applying for a Personal Loan

Personal loans don't come with introductory 0% APR promotions, but they can still be an effective way to pay down credit card debt. On average, personal loans charge lower interest rates than credit cards—that's 9.58% on a two-year personal loan versus 16.3% on credit cards, according to the most recent Federal Reserve data from May 2021.

What's more, personal loans may have less stringent credit requirements than balance transfer cards, and their set repayment terms can give you more structure than a credit card with a minimum monthly payment.

That said, you may still get declined for a personal loan if your credit needs some work, or you may not get a low enough interest rate to make debt consolidation worth it.

The good news is that many personal loan companies allow you to get prequalified before you submit a formal application, so you don't need to add unnecessary hard inquiries to your credit reports (these can temporarily lower your credit scores). You can also use online tools like Experian CreditMatch™ to get personalized loan offers based on your credit profile.

Ask a Family Member or Friend for Help

If possible, it may make sense to seek assistance from someone in your personal network. This approach can be appealing because you typically don't have to deal with the high interest rates and fees that many lenders charge.

However, it's crucial that you proceed with caution. Mixing money with friends and family, especially in the form of a loan, can cause problems with the relationship.

If you plan to proceed with this option, have a frank conversation about your situation and how you plan to pay back the debt. Also, make sure you draw up an agreement between you and your loved one so that you have a formal contract in place to protect them.

Then, make it a priority to pay back the loan. While missing payments or defaulting won't damage your credit score as it would with a traditional lender, it could cause lasting damage to a cherished relationship. Paying back the loan as agreed won't help your scores, either, so you might also want to consider this as a downside if building credit is a goal of yours.

Improve Your Credit Score

If your credit needs some work but the situation isn't dire, your best option may be to be patient and work on rebuilding your credit before you apply for another balance transfer credit card.

The letter you received after your application was denied (called an adverse action notice) will outline the reasons the card issuer denied your application. You can get a free copy of your credit report in this scenario, and taking the opportunity to review it can help you understand any potential issues that may be affecting your credit score.

Depending on the circumstances, here are some potential ways you can address your credit and increase your score:

  • Pay down credit card debt. This may seem self-evident because it's the reason you applied for the balance transfer card in the first place. But if your credit card balances are too high relative to your credit limits, you may need to make some progress on your debt before you add a balance transfer card to the mix. Look for ways to make additional payments every month to accelerate your debt payoff, and develop a plan, such as starting with the accounts with the highest interest rates.
  • Review the information in your credit reports. Check your credit report frequently to ensure the information being reported by lenders is accurate and up to date. If you notice a discrepancy, such as an account that has been paid off but is still showing an outstanding balance, you can dispute the information with the credit reporting agency on whose report it appears. The credit bureau will contact the lender and ask them to verify and update the information. You may also wish to contact the lender directly to ensure their records have been updated. Just keep in mind that disputing accurate information won't get it removed from your credit reports.
  • Continue making all bill payments on time. Paying your bills on time is the most important thing you can do to build a strong credit history and improve your scores. If you have past-due payments, get caught up on them as soon as possible, then make it a priority to pay on time going forward. Even if an account doesn't normally appear on your credit report, neglecting to pay it can result in a collection account that hurts your credit scores.
  • Use Experian Boost : With Experian Boost, you can get credit for your on-time payments for utilities, cellphone service and even select streaming services. Simply register and connect your financial accounts, then Experian will identify eligible payments. You get to choose which payments to add to your Experian credit file. Once the process is complete—and if the added information helps improve your credit—your FICO® Score will increase immediately.

The important thing is that you take the time to review the adverse action notice and your credit report to determine which areas to address.

Continue Monitoring Your Credit

Whether you decide to pursue another loan option or to work on improving your credit, it's important to continue monitoring your credit so you can track your progress and identify other potential issues as they arise.

With Experian's free credit monitoring service, you'll get access to your Experian credit report and your FICO® Score powered by Experian data. You'll also get real-time alerts when changes are made to your report, such as new accounts, inquiries and personal information.

Keeping track of your credit score will help you determine the right time to apply again for a balance transfer card. Or, if you decide to proceed with another loan application, knowing how to improve your scores can help improve your odds of getting favorable credit options in the future when you need them again.

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