Applying for a credit card for the first time and getting it rejected can come as a shock. Wondering why your credit card application got rejected? Not to worry, this article will help you in knowing all the possible reasons and how you can increase the chances of your application getting approved. There are many factors like eligibility criteria, no credit history, mistakes in the application form, and others based on which your credit card application can be rejected. Hereunder is a detailed list of the factors.
- No Credit History: Organisations like Transunion CIBIL, Experian help banks or financial institutions in evaluating the applicants while issuing credit cards. Having no credit history fairly increases the odds of not getting your application approved.
- Eligibility Criteria: Every bank follows its own set of eligibility criteria in issuing a credit card. It includes age, employment, and salary/income. This factor does play a significant role in getting your application approved. The minimum age requirement is between 21-23 years, but it depends from bank to bank. Having a low income also reduces the chance of an application getting accepted. Make sure you fulfill this requirement before applying for a credit card.
- Errors in Application: It is advised to proofread your documents before submitting them as there is a high possibility of making mistakes in the application form. Bank or credit card companies can reject your application solely based on the mistakes like wrong address in the application form. To get your application approved, kindly fill your application form carefully.
- Wrong Documents Submitted: If submitted documents do not match with the information provided in the credit card application form, then the bank or credit card company can reject your application. Great care is needed while submitting the documents with the application form.
- High Credit Utilization Ratio: Multiple credit card holders should clear their dues on time and keep Credit Utilization ratio low. High Credit Utilization ratio can lead to your credit card application being rejected. Generally, 30% Credit Utilization ratio is still considered optimum but 60% or above builds a negative image for a new credit card application.
- Owning multiple credit cards: Owning 7-8 credit cards raises the probability of your application getting rejected. Seeing you already in possession of so much unsecured loan, the bank will hesitate in issuing another credit card to you.
- Low credit score: One of the important factors is having a low credit score which can surely increase the chances of your application getting rejected. As such, there is no criteria of minimum credit score that can help you get a credit card. All banks/credit card companies have their own terms and conditions. However, to be on the safer side, having a credit score over 750, fairly raises the chances of your application being approved.
- Loan amount is too high: If you have taken loans from the bank and the amount of the same is too high, then it might get difficult in getting your credit card application approved. Before approving the application, credit card issuing banks/institutions assess your repaying capacity and failing to fulfill this criteria raises the probability of application rejection.
- Unstable Work History: There are high chances that your application can be rejected on the basis of unstable work history. If your income is not stable then the bank might not approve the application as unstable income indicates low repayment capacity.
- Multiple Applications at one time: Don’t send multiple applications at the same time, as it will send a bad impression to the banks or credit card companies. Sending multiple applications in one go indicates your credit hunger which can increase the chances of your application getting rejected.
- Location Verification: Location verification can be another reason why your application got rejected. While verifying your documents, address verification is an important step if the address is unreachable then it increases the odds of application rejection.
How can you increase the chances of application approval?
- You can build your credit history by taking a loan from the bank and repaying it on time which will in turn also help in building your creditworthiness. The credit score depends on the repaying capacity, if the loan balances are too high then the credit score gets affected very badly. To build a good credit score, make sure to repay the bank loan on time. After building the credit history and good credit score, you can re-apply for the credit card.
- The latest trend ‘Buy Now Pay Later (BNPL)’ has revamped the whole credit system. This trend is quite popular on e-commerce sites like Amazon. This BNPL trend helps you in building your credit profile. You need not take a loan from the bank, especially to build a credit history. For instance, Amazon Pay Later enables you to make a purchase when you don’t have funds available with you and you can pay later. It makes it more convenient and easier with this feature to improve the credit score.
- Another thing you can do is vouching for a secured credit card. A secured credit card is issued against the fixed deposit. If you really want to own a credit card and enjoy its benefits and features but do not have a credit history then you can apply for a secured credit card. The limit of the secured credit card is based on the fixed deposit amount which will limit your purchasing power. However, owning a secured credit card is a great way to build a credit history from scratch.
- Instead of going for high-end credit cards, start your credit journey by applying for entry-level cards. There are credit cards that do not have a joining and renewal membership fee. They are easy to get and can also help in building a good credit score.
- Another way to increase the chances of your application getting approved is by proofreading the application form and important documents before submitting them.
Keeping in mind the above-mentioned reasons and what you can do after the rejection of your application, will help you in making an informed decision. The first-time credit card applicant should apply for an entry-level card or secured card as it increases the chances of your credit card application getting accepted. These types of cards will help you in building your credibility thereby raising the chances of application approval for other cards too. The ‘Buy Now Pay Later’ is the best way to build and improve the credit profile and it is the fastest way as you won’t have to wait for the entry-level credit card or secured credit card to begin with your credit journey. Multiple credit cardholders must be very careful regarding credit card bills’ due dates and clear them as soon as possible so that the application for another card can be approved.
If your application got rejected, kindly share your experience and comment down why your application got rejected.