Was Your Credit Application Denied? You Have Options 🤔

In today's episode I talk about the reconsideration process.  This is an option for you if your online credit application was denied.  I discuss how this process works and who is a good candidate.

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Transcript

Bella:
Welcome to the How to Stop Being Broke podcast, where the mission is to change your mindset about how you manage your finances so you can build a financial future that you can be proud of. My name is Bella Jones and I am your host. So relax, sit back and let's jump into today's conversation.

Bella:
Hey, Hey. Hey. So we are back for another episode. And in today's episode, I want to talk about the reconsideration process. This is something that I, honestly, had no idea even existed before working on my credit. So I am hoping that by sharing more information about this process, that it can help someone in my audience. So let's talk about what this actually is. Well, the reconsideration process is a process where you are going to ask a bank to reconsider your credit application that was actually denied. Now, I didn't know that we as consumers actually have this option. So for me, this was mind blowing.

Bella:
So let's talk about why someone would do this at and how it actually works. So when you submit an online application, whether it is a car loan, credit card application, personal loan, so on and so forth, you are putting your information into this online portal. And you're hitting that submit button, and you're waiting for this approval or you're waiting for the denial, right? And so when you are submitting this application, it's not actually being reviewed by a real life person. So the lender or bank actually has an algorithm built into the system that's going to look for certain things on your credit report to determine whether or not they are going to approve your application for credit or to deny it. So if there is one or two or a few things that are off in your application, meaning it doesn't quite fit the algorithm, that can automatically turn your application into a denial.

Bella:
So by requesting a reconsideration of your application, you are, essentially, asking a live person to literally review your credit report and reconsider your actual application. And so there are many instances where going through this process has actually turned an application that was denied into an actual approval. The customer service representative can go for your credit report, and they can actually pinpoint the items that were in question, which may have caused your application to be denied. And they can actually ask you questions in order to understand those things that might be on your credit report. So having the opportunity to speak to a live person to provide further explanations can put you in a better position to have your application actually approved. Now, of course, if you have horrible credit scores and you know that you apply for this credit in the hope that you were going to be approved, I would not recommend for you necessarily to go through the reconsideration process.

Bella:
But if you are someone who feels as though you have decent credit and you have the right to question the actual application denial, and you would be a good candidate to go through the reconsideration process. Now, going through this process does not guarantee that your denial will be turned into an approval, but not going through the process at all, you're just leaving that opportunity on the table, right? So it's better to go through the process to see if it is still a denial versus not asking at all. There's that cliche statement, closed mouths don't get fed. And so it never hurts to ask, right? The worst thing the bank can say is still no. But what if you actually go through the process and they turn it around and make it a yes. But you'll never know until you ask.

Bella:
So going through the reconsideration process, if your credit application has been denied, is something that I do recommend. But again, if you really have a situation where your credit scores are pretty decent, if you know you have bad credit and you apply just because, again, I would not recommend you going through this process. But it is something to keep in mind during your credit repair journey. Now, I actually did go through a reconsideration process when I applied for a credit card. So it was a credit card that earns points, and I wanted this credit card, I thought it would fit my portfolio. And so I submitted my application and my application was denied, but I knew at that point in my journey that my credit scores were really good. But I knew that I had history there so it was not surprising, necessarily, that it wasn't denied because I knew that was a possibility.

Bella:
So now, after learning about the reconsideration process, I went ahead and called the reconsideration hotline. And so the agents got on the phone, they were able to find my application. And so, essentially, the red flag on my particular credit report at the time was a new account that I had opened. It was a care credit account that I had opened. Someone in the family was having orthodontic work and I knew that care credit was giving a 0% offer by opening the account. And so I wanted to take advantage of that. And so I had opened the account, and I had basically almost maxed it out, but I knew I was going to pay off the balance with money from my HSA or FSA account at the time, I forget which one that I had. But I knew by the end of the year, I would pay the balance in full. But because it was a new account and I had almost maxed it up, I think I had 80% utilization, that was a red flag in my credit report.

Bella:
So when she asked me about the account, I gave her the explanation that I just told you, and then the agent put me on hold. So she came back on the phone and she let me know that my application was now approved. So I was able to get this credit card, and it was great because I said, wow, look, this reconsideration process does actually work. So if I had not gone through that process, I would've missed out on this amazing credit card. I would've missed out on the bonus points. And I ended up using those same bonus points to book a vacation that my family and I took. So you see how it all kind of just flows, right? One action impacts another action, which impacts another one. So by not going through that process, I would've missed styled on that amazing credit card. I would've missed out on those bonus points. And I would not have been able to have those points to help fund a vacation that my family and I took.

Bella:
So like I said, the worst thing the bank can say is no. But again, there's a chance that no might be turned into a yes. And so I do want to share another story where just asking a question can really change the credit application. So I do know someone who actually applied for a credit card, and they were looking to do a balance transfer from a high APR credit card to a new credit card that was offering 0% APR on balance transfers. But in order for it to make sense, they needed the credit limit on the new card to be a certain dollar amount. So they had applied for the new credit card. And unfortunately, the credit limit that was given to them was not enough to convert or to transfer the balance from the high interest credit card to this new credit card that offers 0% APR.

Bella:
So she kind of felt it was like a waste of an application, but she realized, well, I could just ask to have them review my application again. And sure enough, she did reach out to the customer service department to explain her situation and just ask them to review her application. They were actually able to increase her credit limit by five times. So think about that. So in this example, that could look like a $2,000 credit card limit going to a $10,000 credit card limit, right? That's game changing. So if she had not actually gone through that process to have her application reconsidered, she would have essentially wasted this credit application because now she could not really take full advantage of the balance transfer. So again, this is another situation where just asking to have that lender review your application can really make a difference.

Bella:
Now, definitely keep in mind that you do have a relatively short window to have your application reconsidered. Some banks give you 30 days, some give you 45 days. There are a few that might give you 60 days, but those are very far and few in between. So what's great about the reconsideration process is that it's not going to result in another inquiry on a credit report. They are just going to look at the credit report that was pulled at the time of the application, and they are going to review your information. But you definitely want to take advantage of this process within the time window. So what most banks will do is they will send you a letter with the denial, they'll let you know the reason, they will also let you know the time window in which you can basically appeal the decision or have your application reconsidered.

Bella:
So you definitely want to keep a lookout on the mail or the email. Some banks are actually doing emails instead of mailing things to you. So you want to have an idea of what window you have to apply for this reconsideration. Now, in the event you do apply for the reconsideration and your application decision is still a no, it's okay. I would just say, look at the denial letter and look at the reasons why they denied your application. Is it because you have high utilization? Meaning high balances on credit cards. Do you have a lot of inquiries? Meaning you've been applying for a lot of credit lately. That's a red flag for a lot of lenders. Maybe you have collection accounts. You really want to look at the reasons why your application was denied and start to address those issues.

Bella:
So that way you can, maybe, fast forward the clock to six months, a year later, and you can work on these things in that time period, and then come back to that same lender and apply for credit with them again. Another thing to keep in mind is that sometimes when you do apply for credit and you get these nos, it might lead you down the path of seeing that you have something on your credit report that is incorrect. So that's another thing or another reason why checking your credit report frequently really is going to put you in the best position possible. So you don't want something like errors on your credit report, fraudulent activity on your credit report, to really get in the way of you applying for credit with these lenders. So I definitely recommend, as I always like to say, checking your credit report frequently, whether you have good credit or bad credit, or if you're working on your credit, you should always be reviewing your credit report frequently, whether that is once a quarter, twice a year or at least once a year. So therefore, you can really understand what's going on with your credit at any given time.

Bella:
And one other tip I would also like to give to you is, before applying for credit, you should always look at your credit report yourself beforehand. You really want to make sure you understand what's on there so therefore you're not caught by surprise by anything that comes up in the event your application is denied. So that is it for today's episode. I want to thank you so much for stopping by, and I'm looking forward to talking to you soon.

Bella:
Thank you for listening to another episode of the How to Stop Being Broke podcast. Now, if you enjoyed today's episode and look forward to future conversations, like the one we had today, make sure to subscribe. Because it is time for you to stop being broke and create a financial future you can be proud of.