Credit Cards are popular payment tools that provide the convenience of buying now and paying later. The ease of getting a credit card has also added to its immense popularity. But sometimes, your credit card application may get rejected for various reasons. It is thus important to be aware of the reasons for rejection and take necessary steps to avoid rejection in future.
Here are some reasons, and a possible way out for you.
Incorrect Information: Your credit card application may get rejected if you have provided incorrect information like wrong PAN, driver’s license number etc.
Low Credit Score: Lending companies and credit card companies refer to your Credit Score before approving a loan or credit card application. Not many pay heed to this three digit number that describes your creditworthiness. A score of 750 or more is considered healthy enough for you to get the best loans or credit card offers. If your credit history reveals late payments, defaults and loan settlements, your credit score could be poor, and you may not meet the eligibility criteria of the credit card company. This may also happen if you don’t have a credit history because you’ve never taken a loan or credit card before.
Minimum Income Requirement: Banks have a minimum income requirement for credit card applicants. If you are not above their income cut off – for example, having a salary of Rs. 20,000 – your application may get rejected.
High Existing Debt: Banks would see your current liability to ascertain whether you have the ability to repay them before issuing you a new credit card. If you have high existing debt, your application would get rejected.
What You Can Do To Avoid A Rejection
Double Check Information Provided: You must double-check your credit card application before submitting it to rule out any possible human error while filling the form. Ensure all the information provided is correct. Fudging any information is a strict no-no.
Check Your Credit Report: Before you apply for any credit product, go online to get a copy of your credit report. Just Google “free credit report” and get yours in a few minutes. Check the report for anything that may be affecting your credit score. For example, there may be a pending EMI you may have forgotten about. If there are any errors – like incorrect information shared by your last lender – get it corrected immediately since something of this sort can impact your creditworthiness. Also, keep an eye on your credit score on a regular basis.
Improve Your Credit Score: A low credit score can adversely affect your ability to take fresh credit from financial institutions. Low credit score can be due to poor financial behaviour in the past where you have delayed paying EMIs, or had high debts. Some steps to improve your credit score: pay your EMIs and credit card bills in full on time, use less than 30% of your available spending limit, maintain a good balance between secured and unsecured loans, and try to maintain credit accounts for the long term as this reveals financial discipline over the long term.
Don’t Apply For Too Many Credit Products At Once: If you make multiple credit card applications at the same time, your credit score will take a hit. With each application, the credit card company launches a “hard enquiry” – basically, an enquiry into your credit history. Each hard enquiry lowers your credit score marginally. Several hard enquiries can damage the score. Multiple applications will also show you to be credit hungry. Therefore, your applications may be rejected. A smarter approach is to visit an online marketplace, shortlist the cards you’re eligible for, and get the card which offers you benefits most useful to you.
Take A Secured Credit Card: Secured credit cards are issued against the fixed deposits you hold with your bank. Such a credit card is handy for people who have a poor credit score or no credit score at all. The credit limit on such card will be a percentage of the principal amount held in your Fixed Deposit. You can use your secured credit card judiciously, make timely payments, and improve your credit score.
By keeping these points in mind, you can ensure that your credit card application never gets rejected.