Reasons Why Your Credit Card Application Can be Rejected
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Reasons Why Your Credit Card Application Can be Rejected

  • Highlights

  • Poor credit history

  • Low repayment capacity

  • Errors in the application form

  • Irregular employment history

As prudent financial instruments to satisfy your short-term personal needs, credit cards are extremely useful. Offering a pre-approved limit, you can use your card to make purchases, pay bills, and even improve your credit score.

Though the process of applying for a credit card has simplified manifold over the years, the financial institution issuing you the card does take a close look at certain 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. The credit score reflects your creditworthiness and a good score paints you as a responsible borrower in the eyes of the lender who repays his/her dues on time. Financial institutions seek for a minimum score before issuing a credit card. It is easily available from credit bureaus that study your financial behaviour to determine your score.

No Credit History

While a poor credit score can dent your chances of procuring a credit card, lack of credit history is equally damaging. Without a credit history, the card issuer has no idea on your money management skills and repayment strategy. If you are applying for a credit card for the first time and haven’t taken any loans earlier, this can be one of the issues leading to rejection.

Additional Read: How To Use Credit Card Wisely

Not Adequate Income

When you use a credit card, the company issuing it pays on your behalf to the merchant. 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.

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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 with monthly income. A low DTI ratio suggests you have lower debts 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 important to fill it with utmost accuracy. Any error, however small it may be, can lead to a rejection. Make sure you provide the correct details related to your income, address, age, etc. It’s essential to double-check the information in the application form to make sure everything is correct and in sync with the requirements of the card issuer. If in doubt regarding anything to be filled, it’s advisable to get in touch with the concerned representative(s).

Additional Read: How To Use Credit Card Points

An Unstable Employment History

If you have a history of frequently changing jobs, the same can lead to a 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 these, do read the terms and conditions well to avoid penalties and rejection before applying for a credit card.

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