2 min read
25 May 2021

As prudent financial instruments to satisfy your short-term personal needs, credit cards are beneficial. You can use your card to make purchases, pay bills, and even improve your credit score while staying within a pre-approved limit.

Banks have simplified the application process for credit cards over the past couple of years; however, financial institutions issuing the card do take a close look at specific parameters before approving your application. In these six cases, it may reject your application.

Poor credit score

This is one of the fundamental reasons behind credit card application rejection. Your credit score reflects your creditworthiness, and a good score paints you as a responsible borrower in the lender's eyes. Financial institutions seek a minimum score value before issuing a credit card. It is readily available from credit bureaus that study your spending behaviour to determine your score.

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No credit history

While a poor credit score can haper your chances of procuring a credit card, a lack of credit history is equally damaging. The absence of credit history makes it challenging for the card issuer to gauge your money management skills and repayment strategy. One of the leading reasons for rejecting your application could be if you're applying for a credit card for the first time and haven't taken any loans earlier.

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Inadequate income

When you use a credit card, the company issuing it pays the merchant on your behalf. So, you need to pay back the amount utilised from your approved limit within a stipulated time. However, before issuing the card, your issuer will gauge your repayment capacity by taking a close look at your income through salary slips, IT returns, etc. To avoid credit card rejection, make sure your income matches the expectation of your issuer.

High debt-to-income-ratio

Debt-to-income (DTI) ratio is a certain percentage of your monthly income that goes into paying debts. It is calculated by dividing your monthly debt payments by your monthly income. A low DTI ratio suggests you have lower obligations and vice versa. Ensure you have a low DTI ratio to instil a sense of confidence in your issuer.

Errors in the application form

When you fill-up the application form for your card, it's vital to fill it with utmost accuracy. Any error, however small it may be, can lead to rejection. Make sure you provide the correct details related to your income, address, age, etc. It's crucial to double-check the information in the application form to make sure everything is right and in sync with the card issuer's requirements. It's always advisable to contact the concerned representative(s) when in doubt.

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An unstable employment history

If you have a history of changing jobs frequently, it can lead to rejection. Your card issuer perceives this as a lack of steady income. Make sure to apply for a credit card only after you have stayed in a particular job with a company for a few years.

Apart from this, read the terms and conditions well to avoid penalties and rejection before applying for a credit card.

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