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There’s no doubt about it – rejection hurts! Especially when you were counting on getting a shiny new credit card to stash in your wallet – for emergencies, an upcoming vacation or to make a big purchase with low interest.

If you do apply for credit and get turned down, though, don’t sink into despair. Instead, know what steps you can take to find out why you were rejected, fix the problem and, eventually, get the plastic you desire.

Step No. 1: Find out why

Getting a rejection letter when you’re expecting a card can be upsetting, but don’t toss that piece of paper aside. Instead, read it to find out the reason for the rejection, and call the company for further details, if necessary. Here are some factors experts say can play a part in getting denied a credit card:

You made a mistake on your application. “Maybe, for example, you’re missing employment or income information,” says Carrie Coghill, former director of consumer education for FreeScore.com. “These companies aren’t equipped to call a potential customer and say, ‘You filled out your application improperly.'”

There’s an error on your credit report. “Maybe you have a common name, and there’s an account that’s not yours on your credit report,” says Lita Epstein, author of “The Complete Idiot’s Guide to Improving Your Credit Score.” Or, she says, “Maybe there’s old information being reported – a doctor bill from a long time ago that you never got notice of – listed as a collection item. That type of thing can drag your score right down.”

There’s an issue with your work history. If you were recently unemployed or changed jobs, you might have to wait at least six months – or get a raise. “Maybe your income is too low or you just haven’t been in your current position long enough,” Coghill says.

Your credit is shaky. You might think you have decent credit – after all, you were only late paying your bills once when the car broke down and, oh, after that shoe sale – but a creditor might see things differently. “Maybe you do have a bad credit history, you have been delinquent on your bills or you failed to pay something in the past, and it was charged off,” Coghill says.

You’re having financial problems. You might have good credit, but if lenders think you’re applying for credit due to a sudden financial crisis, they’ll probably say no. “If credit card companies see too many inquiries, that raises a red flag,” Coghill says.

Step No. 2: Work on your credit.

No matter why you were rejected, you should immediately order copies of your credit reports. You’re entitled to a free one from each of the three credit bureaus (Experian, Equifax and TransUnion) once a year under the Fair Credit Reporting Act. You can pull your reports from AnnualCreditReport.com, then study them and create a plan of action, experts say.

“Don’t just think, ‘Oh, I’ll reapply in six months.’ Ask yourself, ‘What exactly do I need to do to improve in six months?'” says Robert Manning, author of the book “Credit Card Nation.”

Depending on why you were rejected and what your credit reports and credit scores look like, here are some steps to consider:

“Instead of randomly sending in solicitations you received in the mail, go to the card issuer’s website, then call and ask what age they’re looking for, what income level and job history they’re looking for, and – most importantly – what credit score they’re looking for.”

Pay all your bills on time – or, better yet, early.

“Set up something automatic, so you don’t ever risk not paying a bill on time,” Epstein says. Also, if you are someone who uses a credit card a lot, but pays it off monthly, consider paying your balance a day or two before the statement closes rather than on the due date, so it doesn’t look like you’re always maxing out your card. Epstein says: “If you pay before the statement closes, it gets reported as $0 due, and you look like a better customer and a better risk. It’s a great way to quickly get your credit score up.”

Pay down your balances on existing credit cards or loans.

Creditors don’t like to see a high credit utilization rate – the ratio between the amount of credit available to you and the amount you’re using, experts say. If you carry high balances, lowering them will improve your credit score. Epstein says: “I recommend the round-robin strategy – pay down your debt first to 30 percent of your credit limit, then 20 percent, then 10 percent. Do it card by card.”

Be strategic about closing cards.

Sometimes, credit card companies get nervous if a consumer has too much available credit, but that doesn’t mean you should just start cutting up cards, experts say.

“If you close the card you’ve had the longest, that affects your credit history, which affects your score. You don’t want to cancel relationships you’ve had for a long time,” Coghill says.

Do consider closing retailer cards that provide little benefit and just tempt you to shop, she says: “A lot of people end up with a bunch of store credit cards. Those are the ones to eliminate first.” Just don’t close them all at once.

Consider a secured card as a credit-building tool.

If you have bad credit and no credit card, Howard Dvorkin, certified public accountant and personal finance adviser, recommends you consider getting a secured credit card – especially one that, with responsible use, can turn into an unsecured card. Dvorkin says: “After a year or so of positive history, maybe they issue you $500 unsecured, then you start to clean up your credit from there.”

See related: 10 things not to do when applying for a new credit card

Step No. 3: Find the right credit card for you

If the problem that led to your initial rejection was relatively simple to fix – say, an incorrect item on your credit report that you’ve disputed and had removed – you should still wait at least three months to apply for another credit card, experts say. “Every time you apply, that’s an inquiry on your credit, and you want to make sure you spread those out over time,” Coghill says.

However, experts say that if your rejection involved iffy credit or another bigger issue, it’s especially important that you shop around before applying again.

First, Coghill says, it’s important to think about what type of card will give you the most benefit, whether it’s a low-interest card or a rewards card that gives you cash back or airline miles. Then, check to make sure your application is likely to be accepted.

“Instead of randomly sending in solicitations you received in the mail, go to the card issuer’s website, then call and ask what age they’re looking for, what income level and job history they’re looking for, and – most importantly – what credit score they’re looking for,” Coghill says. “You can ask, ‘If I have a score of 650, are you going to accept me?’ If their requirements are too stringent, call other card issuers.”

Shopping around should eventually pay off, Epstein says: “Some lenders are more rigid than others, and some are cutting back on the number of customers and type of customers they want. It’s sometimes just a matter of finding the right match.”

See related: Which type of card is right for you?

Original published date: 06/02/2011