Lenders sometimes deny loan or credit cards when applicants have insufficient credit references. This simply means that there isn't enough information on your credit report for the lender to make an informed decision about your creditworthiness.
When your application is denied, the creditor is required to send a letter letting you know the reason or reasons you were denied, and insufficient credit references will be listed on the letter if that is one of the reasons. This adverse action notice should come in the mail a week to 10 days after your application is denied.
Denied Because of Insufficient Credit References
There are many different reasons you could be denied, one of them being"insufficient number of credit references." This note means that you don't have enough credit accounts on your credit report to meet that lender's qualifications. This situation also might be called a "limited credit history" or "thin credit file."
Different creditors and lenders have different requirements for the number of credit accounts you need to have before they'll approve your application. Some may approve you without any accounts (or references), others may require you to have more than three. You can be denied for not having enough credit accounts, even if you have a pretty good credit score. However, you probably won't have excellent credit with only a few credit accounts on your credit report.
What to Do Next
The adverse action notice you receive also will include instructions for ordering a free copy of the credit report that was used in the decision. You'll have 60 days to order a copy of this credit report. Make sure you get your report so you can verify that all of your open, active credit accounts are being reported properly. Viewing your credit report also will confirm the number of accounts you have on your credit report.
If you're denied because of an insufficient number of credit references, you'll need more positive credit accounts on your credit report before your application can be approved at that institution. Because creditors' requirements vary, you may get approved at other bank or credit card issuer even with the same number of credit accounts on your credit report. Consider shopping around with other lenders.
Note
To build up your credit when you have a limited credit history, consider a retail credit card or secured credit card, which requires a deposit. Becoming an authorized user, getting a joint account, or applying with a co-signer are other options for building up your credit so you can qualify alone.
Be careful that you don't apply for too many credit accounts at one time in an attempt to add more accounts to your credit report. It could have the opposite effect and make it even harder to get approved, in the short-term at least. Lenders consider it risky when an applicant has several new accounts opened within a short period of time. However, as you manage these accounts well and pay on time, having these accounts on your credit report can work in your favor.
FAQs
There are many different reasons you could be denied, one of them being "insufficient number of credit references." This note means that you don't have enough credit accounts on your credit report to meet that lender's qualifications. This situation also might be called a "limited credit history" or "thin credit file."
What does it mean when your credit is insufficient? ›
Insufficient credit history means that there is not enough data available to evaluate a person's creditworthiness. This is sometimes referred to as a Thin File. This could be due to a variety of reasons, such as being new to credit, not having any credit accounts, or not using credit for an extended period.
What does it mean when you have an insufficient credit limit? ›
Reasons for Low Credit Limit
Without sufficient credit history, lenders have limited information to evaluate the borrower's ability to manage debt responsibly. High Debt-to-Income Ratio: Having significant outstanding debts compared to income can lead to lower credit limits.
What does "unable to verify credit references" mean? ›
Unable to verify credit references.
This reason should be used when a creditor has requested credit references beyond the history found in a credit report (such as when the applicant does not have an established credit file or credit score), and the creditor is unable to very the references provided by the applicant.
What does it mean when credit is not sufficient? ›
Insufficient credit history, what this article is all about, indicates that the applicant doesn't have enough accounts with a long enough payment history to approve an application. Banks, cell phone companies, and utility companies also look at this information when you set up a new account.
How to fix insufficient credit references? ›
You don't need to feel too stressed about having an insufficient credit history. But you should also strive to start building credit as soon as possible. Getting a credit card, making small purchases each month, and always paying your bill (in full) by the due date will set you firmly on the credit-building path.
What is insufficient credits? ›
What Is Insufficient Credits? When your account balance falls below zero (0) credits, you may receive an error message indicating insufficient credits. This means that you don't have enough credits to continue sending text campaigns.
What does it mean when it says insufficient amount? ›
of a quantity not able to fulfill a need or requirement. “insufficient funds” synonyms: deficient. meager, meagerly, meagre, scrimpy, stingy. deficient in amount or quality or extent.
What does insufficient credit activity mean? ›
CX Insufficient Credit Activity This means there is 'very limited' information such as Credit Applications and/or Accounts Status History as such, unable to derive a Score.
How do I fix my credit limit? ›
Ask for a raise. Getting a higher credit limit is fairly straightforward, with four primary options available: You can contact your issuer online via the app or online portal, phone customer service, check for an issuer card offer, or apply for a new card that will bump your overall available credit.
It can be a representative at a bank who can give a formal written letter of loans or accounts you have with them. Or, if you have limited or no credit history, a reference can be a current or former employer who can highlight your reliability.
Why is my credit denied because I'm unable to verify my identity? ›
Unable to verify identity
In some cases, your application could be rejected simply because the card issuer was unable to verify your identity or address. Make sure to check whether you mistyped information, changed your address or failed to include other pertinent new personal information such as a legal name change.
What if you don't have a credit reference? ›
Without credit references, you're likely to have a lower credit score, which translates into a higher interest rate – if you get approved for the loan at all, that is. When you apply for credit, the lender will pull your credit reports and also request your credit score.
What does it mean by insufficient credit? ›
Insufficient credit history is just what it sounds like: You don't have enough (or maybe any) experience with loans or credit cards. Lenders, landlords and others won't know if you're a good credit risk because they've got nothing to go on.
What does not having enough credit mean? ›
There's simply not enough information under your credit profile for the credit bureaus to assign a score. This can show up for a few reasons: There are no credit accounts for you reporting to the three major credit reporting agencies (Experian, Equifax and TransUnion).
What does not enough available credit mean? ›
Why is my available credit less than my credit limit? You can think of available credit as your credit limit minus your current balance. If you have outstanding charges on your credit card, they will reduce your available credit.
Why would a credit card say insufficient funds? ›
If you receive a decline 51 response on a transaction, it's pretty straightforward. It's not a general error and means the cardholder does not have the funds to complete the transaction. Credit cards have a credit limit that purchases cannot exceed.
How long does insufficient credit history last? ›
In this article:
| How Long Information Stays on Your Credit Reports | |
|---|
| Type of Information | Timeframe |
|---|
| Late or missed payments | 7 years from the original delinquency |
| Default, including foreclosure, repossession and settlement | 7 years from the original delinquency |
| Hard credit inquiries | 2 years from the date of the inquiry |
5 more rowsSep 11, 2023
What is an Insufficient Balance Error? Insufficient Balance errors indicate that some outgoing transactions (e.g. sell, trade, transfer) are missing basis from an incoming transaction (e.g. investment, gift, income). This is typically due to a missing transaction(s).
