How many calls do you get from credit card companies in a day? Many, right? It is because a credit card is the easiest form of loan one can get today, and it is also quick business for the banks. It is an unsecured loan that does not need you to provide collateral like land, house, or shares to the bank.
Financing companies calculate your trustworthiness by your salary and existing debt obligations. Besides, it is common knowledge that credit or CIBIL™ score plays a crucial role in getting a credit card. It acts as a report card and provides an overview of all current and previous loans. Based on the number of loans, inquiries, and repayment track record, it gives a score between 300 and 900. Your aim should be a score above 750 to avoid credit card application rejection. However, is that enough? Nothing to worry, because Shriram Finance is here to help!
Let us consider a situation. Suppose you have spent the last few years building a good credit score and paying all your dues on time without defaulting. Now, you wish to apply for another credit card. The application has been pending for a few days, and finally, it got rejected! Yes, it is shocking, and yes, it can happen to anyone. You will think why was my credit card denied even with a good credit score? Let us understand why.
Why was my credit card application rejected?
Every bank has its internal criteria for issuing credit cards. Primarily, they consider salary, debt, age, work experience, etc., along with the credit report. Your credit score may be good, but the credit cards can get rejected. The credit card can get declined If you fail to meet even one criterion. Now, let us understand these reasons for credit card rejection
1. Your Income May Not Be High Enough
Every bank wants a minimum income that they set to process the credit card application further. They ask for salary slips, ITRs, Form 16, etc., along with the application as income proof. If the salary is insufficient to pay back the debt, then it will be the reason for the credit card application rejection straight away. Also, if the income is unstable or there is frequent switching of jobs, then the bank can decline the credit card application.
2. You Have Too Much Debt
Banks or lenders calculate the debt-to-income ratio. A high ratio indicates that there is an existing baggage of excess debt, and the repayment capacity is not adequate to pay it back. In such a case, the banks will decide that we cannot handle more credit, and it can lead to our credit card application rejection.
3. You Already Have Too Many Credit Cards
We may wonder why our credit card application gets rejected even with good credit. The lender knows how many credit cards the applicant possesses from the credit report. If we have a high number of cards already, it shows that we cannot manage our finances well, and this results in our credit card application rejection. We can also get flagged as a high-risk client by the bank for being excessively credit-hungry.
4. Your Credit Report Has Not Been Updated Recently
Occasionally, situations arise where we close certain loans or credit cards. But these changes are not immediately reflected in our credit reports. Updating records can take several weeks. Therefore, it is advisable to exercise patience and wait for these updates to appear before reapplying for a loan or credit card. Failing to do so could potentially result in a credit card application rejection for having too many existing loans, even when that may not accurately reflect your current financial situation.
5. Too Soon Since Your Last Credit Card
If we apply for another credit card too soon, the bank identifies us as someone who overspends or can’t manage finances wisely. The ideal gap between two credit cards should be at least 6 months or more. The more the time gap, the better our chances of getting the new credit card approved. If we are inquiring or applying too frequently, despite good credit, your credit card may get declined.
6. You Have Applied for Too Much Credit
Since the credit card companies pull a hard inquiry on our credit report once the application is received, it lowers our credit score temporarily. However, multiple applications will cause serious harm to the credit score and eventually result in credit card application rejection.
7. You Defaulted on a Credit Card Payment a Long Time Back
Lenders want to know whether we have been repaying our credit card dues in the past or not. It shows that we are responsible and trustworthy borrowers. However, making late or missed payments frequently will lead to rejection of credit card applications.
8. When You Max Out Your Credit Cards
Ideally, a credit card should be used only up to 30 to 40% of the credit limit at any given time. If we max out or fully utilise the limit very frequently, then it is reported by the credit bureaus and reflects negatively on our credit score. The overutilisation of credit cards indicates that we depend on them to manage our expenses. It is a red flag for lenders. This can get our credit card declined even with a good credit score.
9. Mistakes in Your Application
We should fill out an application form containing important details, such as our communication address and number, office address and number, employment details, existing credit card information, etc. Along with the form, we should submit KYC documents, salary slips, ITRs, Form 16, etc. If we miss out on any of the above, even with a good score, our credit card application is liable to get rejected.
10. You have not been at your current job for long enough
One of the reasons for credit card application rejection is the short duration of the current employment. Being in a job for less than 6 months can get us. It is better to be in the job for at least 6 months to a year to avoid credit card application rejection.
Conclusion
Even with a great credit score, you can still be declined for a credit card for various reasons. You should maintain a high credit score by paying all your EMIs and credit card dues on time. However, you must also keep in mind to check other factors like filling out the credit card application form in order or not applying too frequently to avoid the credit card application getting declined
You may have a good credit score but you can still keep getting denied for a credit card. There are other things not in your hands, such as the credit report not being updated. Also, a credit card application rejection will bring down your credit score. So, to avoid this, you must do due diligence on your part and always maintain healthy credit needs. We, at Shriram Finance, offer loans at a very competitive interest rate and the process is rapid. Click to apply now!
Key Highlights
- Always make sure to check the income and age requirements of the bank before applying for a credit card.
- Do not use more than 30-40% of the credit limit of your existing credit cards at the time of applying for a fresh one.
- Keep unsecured debt under check. A mix of secured and unsecured loans in the credit report is considered a healthy balance for the lender.
- If your credit card was declined, wait a minimum of 6 months before applying again for another credit card.
FAQs
1. Why is my credit score good but still rejected?
Having a good credit score is just one factor in the approval process. Lenders consider various factors like income, existing debt, and credit history. If your income is insufficient or if you have a history of late payments or high debt, you may still be rejected despite a good score.
2. How to get a credit card after being denied?
After a denial, review your credit report for errors, improve your credit utilisation ratio, and pay bills on time. Apply for cards suited to your credit level, or consider a secured credit card. Over time, responsible financial behaviour can lead to approval.
3. Can I apply for another credit card after being denied?
Yes, you can apply for another credit card after being denied. However, it's essential to address the issues that led to the rejection, such as improving your credit score or addressing income concerns, before applying for a different card.
4. Why my credit card application is declined despite a good credit score?
Lenders evaluate various factors, including income, existing debt, and credit history. A good credit score is just one aspect, and if other factors don't meet their criteria, your application may still be declined.
5. Why my credit card applications are getting rejected?
Multiple factors can lead to rejection, including low income, high debt, late payments, or a history of delinquencies. It is essential to address these issues and choose cards that align with your credit profile.
6. Why did I get denied for a credit card with no credit?
Even with no credit history, other factors like income and financial stability matter. Consider starting with a secured credit card or cards designed for individuals with limited credit to build a credit history and improve your approval chances over time.
