Being declined for credit can be disappointing, especially when applying for business credit, as this could affect your future plans and growth. It’s important to find out why you’ve been declined before reapplying, as multiple applications can prevent lenders from approving you in the future.
When submitting a new application, evaluate your current situation compared to when you previously applied. If there are items on your credit files you believe you could still work on, or if your credit score, report, and income remain the same as your last application, it’s unlikely that you’ll be approved when reapplying. Remember - you are in control of your credit report!
How do lenders decide whom to lend to?
When you apply for a credit card, lenders review the information provided on your application, along with the credit history on your credit files with the relevant Credit Reporting Agency (CRA).
Not sure what this means? Here is a step-by-step guide to understanding your credit decision!
Why have I been turned down for a business credit card?
There could be multiple reasons why you have been declined for a business credit card. You can be declined immediately after your application or after further review of your application information.
Below are the common reasons credit can be declined…
1. Your business doesn't fall into the eligibility criteria of the lender.
Each lender will have a set of criteria and requirements that need to be met in order to be approved for a line of credit. This means, even if your credit score is in good standing, elements of your business may not meet the requirements of that lender.
Even when you have an existing account, lenders periodically review and update existing criteria, meaning changes in your finances and business can affect your access to your current account which could be receiving a credit line decrease, decline, or closure.
2. Mistakes on your application.
Mistakes on your application can sometimes be enough to be turned down by the lender. Always make sure to double-check your information, especially personal details as this could result in difficulty locating your credit files. If you notice any typos after submitting the application, we recommend contacting the lender to get this updated as soon as possible.
3. The lender was unable to confirm your identity.
Fraud is on the rise, and lenders and creditors are encouraged to take extra steps to verify your identity before providing a line of credit. If you have recently changed your name, or if the name submitted on the application has discrepancies in comparison to your government ID, the lender may be unable to confirm your identity. Remember, these checks are there not only to protect the lender but to protect you against having your identity stolen.
4. Errors on your credit files with the Credit Reporting Agency.
The information found on your credit files will include your personal details, previous addresses, checking bank accounts, previous credit and payment histories, and your small business credit score. Incorrect information can heavily influence your chances of approval for a credit card. It could also result in your existing credit line being revoked. Check which Credit Reporting Agency the lender uses and ensure all the information on the files are up to date and correct.
It’s also a great idea to check if the lender will be reviewing your personal or business credit files…or both!
5. There isn't sufficient information on your credit files.
Lenders use the information on your credit files to determine your credit decision. If there is insufficient payment history, delinquencies, or charge-offs with previous creditors, this affects your creditworthiness and you run the risk of not having sufficient data to approve your application for new credit.
6. You have a history of late payments.
Having a history of late payments can not only affect your credit files when submitting new applications, but it can also result in having your limit decreased on an existing account. Remember this decision isn't permanent - remain diligent with your payments, and you may be approved for more credit in the future!
What should I do if I have been refused or received a limit decrease after my initial approval?
When your lender closes your existing account or decreases your credit line following a review, it can come as a surprise. The lender will be able to provide you with the reasons why this decision was made, and below you will find the crucial steps to follow.
1. If you have an outstanding balance, keep making your payments.
These decisions aren’t always permanent, so make sure you don’t lower your chances of a future approval or limit increase by missing payments or paying late! By not keeping up with your payments, you are not only reducing your chances of a future approval or increase with your current lender, but this may also have an effect when applying with other creditors, as it could be reported on your personal and business credit files.
2. If you have been declined, pay attention to the reasons for this decision.
When your application is declined, it’s tempting to reapply right away. The lender will have determined this decision from information made available to them. Before submitting a new application either to the same lender or a new one, make sure that you have taken the necessary steps to improve your chances of approval. Remember - you’re in control, and multiple applications can negatively impact your credit files! Click here to read how to build business credit.
3. These decisions cannot be overturned or reconsidered.
Unfortunately, lenders are unable to overturn or reconsider these decisions, as this would usually mean breaching their credit policy. Once your account is fully paid off and closed, you may be eligible to submit a new application. It’s important to wait before reapplying, as this allows time to improve any derogatory items on your personal or business credit files, meaning you could be approved. Remember, if you’ve only had a limit decrease, your account will continue to be monitored, and staying on top of your payments could result in an increase down the line.
How will this affect my credit score?
Applying for a Capital on Tap Business Credit Card has no impact on your personal credit score - even if you’re declined.
If your limit has been reduced on your existing account, this will be noted on your credit files, along with other payment history elements. However, be aware that you will never be reported as being over your credit limit for your Capital on Tap Business Credit Card if your limit was higher at the time of spending.