I applied for a Kohl’s card the other day because I would have gotten an extra discount on all of my stuff for doing so, and I was buying a bunch of stuff. Here’s some background on me:
I have one credit card, which has been over its limit once, and had no late payments, since I got it back in November.
I have a checking account that has been overdrawn once since I got it last September.
And I got denied. I thought you couldn’t get denied for store cards?
I don’t understand the messages they sent me on my denial letter. They say:
Limit utilization on revolving acccounts
Limit utilization on revolving bank accounts
Percent of trades opened in last 3 months
Is the credit card that was over the limit a department store card like Kohl’s? The fact that it was over the limit for a time could have been a red flag.
You haven’t had your checking account very long so the overdraft was definitely a red flag.
Have you opened any other charge accounts? That last one is a puzzle. Have you been turned down for another credit card recently?
Since this is IMHO I’m gonna give you mine. Wait until you’ve had your checking account for a year (and for Og’s sake don’t overdraw it again!) and reapply. The odds should be well in your favor for getting the Kohl’s card then if you really have your heart set on it.
Oh, one more thing. Don’t apply for every credit offer you receive. Truthfully, until you are out of school, one limited Visa or MC type card is all you need. It’ll help you establish credit, especially if you are good with it, don’t use it for everything to the point you have it maxed all the time, and pay on time always, which it looks like you already do.
Yes, I do sound like your father. My father told me all these things. I followed his advice. I have super duper credit. See, it works!
Oh yeah, here’s something to know.
At most places, the decision is either 90% or 100% based on your credit score.
Your credit score is a 3-digit number based on the items based on your credit report.
Those factors they give you… they’re substantial contributors to your score, but they don’t actually MAKE your score. Dozens of factors, sometimes with feedback loops in the equation, make your score.
You almost certainly got denied because of your score not meeting their cut-off, not because of those specific 3 reasons.
I’ll give you point by point reading of what they told you.
—Limit utilization on revolving acccounts
That means that the percentage of credit used versus credit available is not what they like. This is a factor of variable importance depending on the rest of your report, but in general people report highest scores when their utilization of revolving accounts is between 25 and 40%. Below 25% hurts a little bit, above 50% hurts more.
—Limit utilization on revolving bank accounts
This should be basically the same as above, except it would refer specifically to credit lines with banks as opposed to credit lines with non-bank entities. Presumably, gas cards and store credit cards would be excluded from this entry, but not from the above entry that just says “revolving accounts” instead of “revolving bank accounts”.
—Percent of trades opened in last 3 months
A “trade” or “tradeline” is a line item on your credit report indicating a relationship of some kind with someone. I have always assumed it could even include collection items or judgements, but on reflection, I have no evidence that it does.
The best scores will come when you have trade lines that are old. Seriously old. Having opened something recently doesn’t help your score. One of the factors you get scored on is the average age of your most recent account. The higher that number is, the better, although I’m unsure as to whether it stops helping at some point. 15 years may not be better than 10.
My advice to you is to avoid store cards. The interest rates are extortionary, and almost anywhere that takes them also takes VISA or Mastercard.
By just using one or two credit cards, you can keep your number of trade lines down to a reasonable number, which will help your score.
My other advice is to not use credit for anything you won’t be able to pay for at the end of the month, or that doesn’t make you money. Especially when you’re in school, and probably don’t have much disposable income at all.
Just keep your one credit card in good standing, your credit score will go up.
There’s a good chance that Kohl’s is doing you a favor. If you’ve busted your credit card limit once, I’m guessing that you may still be holding a sizable balance on that card. I’m no credit expert, but I do know that it can be beneficial to have a low liabilities to credit ratio, and it is certainly not good to be extended on one card when you’re applying for another.
If you’re making small payments on a large debt, and then you go out and get another credit card and are forced to start paying the mimimum balance on both cards, you’ll quickly rue the day that you saved 10 percent at the register, because the interest you pay on these cards will, over time, waste a hell of a lot more money than you “saved” on the purchase.
My suggestion is to note that Kohl’s (or any other credit card company) fully realizes that there’s no such thing as a free lunch (or even 10% off a free lunch that’s put on a new credit card with 19% interest), look at this as a blessing in disguise, and pay cash for things until you can get your one credit card paid off. Your pocketbook AND your credit score will thank you for it.
Get one of your free credit reports. Pay the extra 5 bucks to see the score. This is how I found out that it would be to my advantage to get a couple more, limited-use credit cards. So I went out, got a Chevron card and a Men’s Wearhouse card, and when I checked my score again several months later, it was much higher because I had a couple extra lines of credit. Yes, the interest rates are bad on store cards, but it’s not a problem if you pay them off every month and if you can get a small discount, then it’s worth it. Note, however, that for me, having three lines was better for my score than having one. However, having ten lines is probably going to be worse than having three lines. I suggest listening to everyone else’s advice.
Another factor could be that, although you’ve just had it since November, you’ve already maxxed your card out once. I’m not in finance or anything, but, unless they gave you a really low credit line, it seems unlikely that you’d max out so quickly unless you were purchasing big-ticket items or using that card really often, or a combination of the two. Since I don’t know you, I obviously can’t tell whether or not you’re making too many purchases, but it might be worth it to take a look at what you’re buying and cut back on your spending if necessary.
I’d second or third the advice to wait six to 12 months, then try again if you still feel you need another credit card.
I have had a checking account for more than 5 years and only 1 overdraft several years ago so I figured this would be a positive on my credit report. When I looked at it though there was no record of me even having a checking account. Could this be due to me having one of those student checking accounts or is this just a sorry bank that I have?
Yes. My credit limit is 500 dollars, and the big maxing out spree happened around the time I needed to get my car fixed, something that I hadn’t budgeted for, if you can imagine that.
Nope, more like “Everything was almost in place, but I was still probably less responsible with my money than I could have been, but the car repairs disrupted things”.