Top Reasons For Credit Card Application Rejection

Credit Cards are a blessing! Before this lovely piece of plastic came around, you had to turn to family, friends, and financial institutions to meet unexpected financial needs. Such a hassle! Now, with a Credit Card in your pocket, you can meet all your expenses (quite a few of them, at least) with a swipe. On top of this, you get rewards and cashback for making purchases using your card. Isn’t that just great?

But as with all precious things, the availability of Credit Cards is tightly regulated. You have to be deserving of this precious piece of plastic to get your hands on it. Not many people understand what it takes to get a Credit Card. They look at it as an easy source of credit without really understanding what it means to own one. Here are 10 common reasons that get the buzzer going on a Credit Card application.

Did you know?

Banks reject more Credit Card applications each day than they approve. Due to a rising number of Credit Card payment defaults, nowadays, financial institutions take extra care when screening profiles for Credit Cards.

The 10 errors

1. Poor Credit History

The first thing every Credit Card provider checks before accepting an application is the Credit Score of the applicant. Credit Bureaus, such as CIBIL, Equifax and Experian study the financial behaviour of individuals, based on information provided by banks, to determine their Credit Score. Bureaus consider repayment history, loan servicing, and credit mix, among other factors to determine the Credit Score of an individual. A low Credit Score means that you have poor money-management skills and haven’t paid your dues on time in the past. A poor score is a sure shot way of getting the rejection stamp on your Credit Card application. Always check your score before submitting your application.

A CIBIL score of 720 and above is a safe bet.  People with lower scores are seen as credit hungry or too risky with a higher chance of defaulting on Credit Card repayments.

You might already have a Credit Card and an add-on card on it for a family member. Defaulting on payment for the add-on card will also damage your credit profile along with that of the add-on card holder.

2. Lower Income Level

People with low incomes do not make good Credit Card applicants. They pose a risk of overspending using their Credit Card and then not being able to pay the dues. Most banks have a minimum annual income criterion for giving away Credit Cards. Application of individuals earning less than the stipulated amount is usually declined. The minimum amount varies from bank to bank.

3. Lack of Credit History

A bad Credit Score is one reason that could lead to rejection of your Credit Card application. An absence of a Credit Score is another story and an equally bad one. People who have never taken credit before or are just starting out their financial journey could suffer from this issue. Having no Credit Score is bad because it doesn’t tell the banks anything about your money management skills. Not having a Credit Score doesn’t say that you are a risky bet, but it doesn’t exactly sing praises of your financial behaviour either. But how are you supposed to build a Credit Score if nobody will give you credit due to a lack of one? Well, you can apply for a secured Credit Card. It’s given against the security of a Fixed Deposit. Use this card wisely to build a score and then apply for a regular Credit Card. We will let you in on a secret here. Having a good relationship with your bank might help you in this situation.

4. Past Application Rejections

Did you apply for a Credit Card just a month ago and have your application rejected? And, now you have committed the blunder of applying again just soon after the last rejection? Things don’t change in a month. Not even your Credit Score. If your application was rejected recently, wait for a while, fix whatever went wrong, and then apply. How will other banks know that your application was rejected? Your credit report will tell them, of course.

Also, do not apply for multiple Credit Cards at the same time. Each application lowers your Credit Score marginally. Too many applications will sink your score to a not so nice number. Research online, compare Credit Cards, and then apply. Don’t take shots in the dark hoping that one will hit the mark. All that your stunts will hit is your Credit Score and bring you loads of rejection papers.

5. Age

If you are too young or too old, chances of your Credit Card application being declined are higher. Credit Cards are usually not offered to individuals below 18 and above 60 years of age. They are offered to people in the prime of their working life, when they have the support of a regular monthly income.

6. Work Profile

Self-employed individuals may find it difficult to get a Credit Card as compared to salaried individuals. Even among the working or salaried class individuals, banks are more likely to reject applications from employees of a small proprietorship or partnership concerns which can close at any time. Individuals working for well-known companies like multinationals and those listed on the stock exchanges are more likely to get Credit Cards (that too with unique benefits).

7. Address In Defaulter’s List

People often travel to different cities in search of better jobs and better lifestyles. If you have just moved into a new place or are living in a rented home, the address of which is in the defaulter list, then your application could get rejected. This can happen even if someone in your family, residing at the same address, is a defaulter and is on the black list of banks.

8. Not Available At Your Residence

If you have changed your residence recently and not provided proof of your new address then there is a good chance of rejection of your application. If the bank initiates verification of your permanent address and determines that it’s fake or wrong, then be ready for a rejection notification. This can also happen if the landline number mentioned in your application is wrong or nobody answers the phone. Hence, it’s vital that you provide correct information in your application and proofread it for errors and typos.

9. Multiple Balance Transfers

If you are one of those people who try to outsmart the banks by taking credit from one card to repay dues on the other, then think again. Multiple balance transfers too are recorded with the credit bureaus. Banks will catch your trick the moment they lay eyes on your credit report and then smartly reject your application. A balance transfer facility is to be used in case of an emergency alone. Don’t misuse such benefits.

10. Error In Application

A very common reason for Credit Card application rejection is an error in the application. Many people do not pay adequate attention when filling their application form and make spelling mistakes and typos. Imagine missing a digit when mentioning your salary or phone number. How unfortunate! Mismatch of signature is bad too. Hence, it’s imperative that you fill your Credit Card application carefully.

Is there any other reason that can lead to a rejection of your Credit Card application? Have you experienced any of the above reasons? If so, what did you do to correct the issue? Do post your comments to help others benefit from your experience!