There are very few things in life that are as painful as
rejections. Imagine a rejection on your credit card application, it may not be
to the level of life’s great rejections but nevertheless irritating, especially
when you have a good credit score?
If you
haven’t checked your credit score, you should start now
Now you will be thinking I have a good credit score and have
been paying all my dues on time, then why has my application been rejected? At the end of the day, it is your credit
score that gets affected due to rejection.
Apart from credit score being a major criterion, there are
other factors that banks look at before approving any loan. They are
1. Your income may not be high enough
This could be true for the credit card you have applied for.
Banks have an internal income criterion for all credit cards. It is difficult
to deduce which card falls under your income bracket. You have to trust the
issuer to approve the card for you as most of the prestigious cards tend to
have a much higher income criterion.
2. You have too much debt
Even though you have a good credit score
and you have been paying your EMIs or credit card bills, banks may think that
you are under too much of debt and would not be able to pay them back.
3. You already have too many credit cards
Banks consider it risky to lend to those who have more than
three credit cards, this has seemed to be one of the common reasons for
rejection.
4. Your credit report hasn’t been updated
recently
You may have closed some of your credit cards or even
pre-paid a large value loan you had previously taken, but this act of yours
would not have been reflected in your credit report. This depends on how often
your creditor reports to the credit bureaus. If your credit report has not been
updated at the time of your application then there is chance it will get
rejected.
5. Too soon since your last credit card
Some issuers might reject your credit card application if
you applied within a very short duration after getting a new credit card. It
doesn’t necessarily mean that you have too many credit cards, it could just be
that they want to see how regular you are with your payments before giving you
additional credit.
6. You have applied for too much credit
Applying too many credit cards at the same time may show
that you are having financial trouble or you are taking on too many credit. The
first 2 credit card issuers checking your credit report and approving your
credit card application may happen, but the subsequent enquiries by other banks
will result in rejections. Though enquiries will not affect your credit score by
much, rejections will have a more adverse effect.
7. You have defaulted on a credit card payment
long time back
Some credit card issuers may not approve your application if
there are any payment defaults, even if it had happened a long time ago and
since then you have a very good track record.
8. When you max out your credit cards
If you already have a credit card and you max out your
credit limit each month, banks will be reluctant to give you additional credit.
Keeping your credit utilization ratio lesser, at least at 50% is best to get
future card approvals.
9. Mistakes on your application
If you have not completed your application properly or if
there were mistakes on any data provided, your application will be rejected at
the time of background verification.
10. You have not been at your current job for
enough time
Some card issuers do not approve credit cards if you are
new to the job at the time of application. So, issuers prefer to approve credit
card applications for individuals who have at least been in their current job
for 3 months or in some cases it is 6 months. So, if you are applying for a
credit card after starting a new job, do so after you have completed at least 3
months at your current job.
Conclusion
Most of these conditions as you can see are internal
policies or criteria that the banks follow which may or may not be public
knowledge. It is your credit score that gets affected due to the rejections. With
every rejection on your credit score it becomes a record and reflects your
credit discipline, looking at the above list of reasons you will realize that most
of them can be avoided.