Have you applied for a credit card multiple times in the past, only to be denied each time? You might be wondering what went wrong. You were certain that you filled out the application correctly, yet you received the same disappointing denial notifications from the bank.
There could be multiple reasons behind the denial of your credit card applications. Sometimes, there could be a mismatch between the specific credit card you applied for and your creditworthiness. Other times, there might be unforeseen reasons contributing to the denial that you haven’t considered.
In this discussion, we’ll explore the top reasons why a credit card application gets denied, how poor financial practices often lead to rejection, and the strategies to increase your chances of approval in future applications.
Top reasons why a credit card application gets rejected
Here are the top reasons why your credit card application might be getting rejected:
- Low credit score: Different credit cards have different creditworthiness requirements. In India, a credit score above 750 and close to 900 is generally considered a good score for approval.
Various factors determine your credit score. A history of late payments, unpaid bills, charge-offs, or maxing out your cards can negatively impact your credit score and lead to application denials. - Limited or no credit history: Many banks prefer applicants with a steady credit history. Even if you are a financially responsible customer, the lack of a well-established credit history can make it challenging to qualify for popular cards.
- Low income: Generally, for a credit card application, you need to list your current sources of income. Your income plays a significant role in the bank’s decision to approve your credit card application.
A card-issuing bank usually favours customers with higher incomes or lower debt-to-income ratios. You are required to submit your salary slips, income tax returns, or Form 16 to demonstrate your income. - Poor track record: If you’ve previously had an account with the bank you’re applying to, they may review your past relationship with them. Applying for a credit card shortly after closing one might lead to application rejections as it may not be in the bank’s best interests.
- Errors in the application form: Even minor errors or typos can result in a credit card application denial.
Avoid these poor financial practices to prevent credit card application denial
Avoid the following bad financial practices so that a bank does not deny your application:
- Having too many credit accounts: Having too many accounts in a short period is a common reason for the rejection of credit card applications. If you have had multiple credit accounts in the past 24 months, it's often a reason for automatic rejection.
- High credit utilisation ratio: The credit utilisation ratio is the percentage of credit usage against the total available credit. A higher ratio means you depend too much on credit and will likely be a defaulter. A credit utilisation ratio of 30% or more is a high ratio.
- Irregular or late bill payments: Irregular or late bill payments can mess up your credit score and might result in your credit card application denial. Even paying the minimum due amount of the total outstanding bill will result in a low credit score.
- Unstable work history: Most credit-card issuing banks prefer that potential consumers have a steady work history to make them favourable candidates for availing a credit card. If you switch your jobs frequently, it shows a lack of stability in your career and may lead to your credit card application denial.
- Frequent applications: Applying for multiple credit cards may affect your credit score. It will cast doubt on your ability to manage your finances and pay your bills promptly.
How to ensure the approval of your credit card application?
To ensure your credit card application isn't declined, consider the following steps:
- Keep checking your credit score periodically
- Choose a credit card that aligns with your credit profile and financial needs
- Make timely payments of your credit card bill
- Remember to list all your income sources and double-check the details
- Keep your credit utilisation ratios low
- Avoid too much spending
- Avoid frequent applications
The good news is you can get a credit card like FIRST WOW! Credit Card without any documentation, income proof and credit history! A fixed-deposit-backed credit card, it comes with a host of features, including:
- 7.5% interest rate against your FD
- 4X reward points (that never expire!)
- Anytime, anywhere, redeemable reward points
- ZERO forex conversion fee
- 100% ATM cash withdrawal limit of FD value
- Over 300+ merchant offers and more
The next step
A credit card application can get denied for various reasons: low credit score, high credit utilisation ratio, insufficient credit history, etc. You can improve your creditworthiness by following the best financial practices and increase the chances of your application getting approved.
Furthermore, you can get an ideal credit card for your requirements from IDFC FIRST Bank Credit Cards that comes with a range of benefits, including lifetime free, zero forex conversion fee, low-interest rates, reward points that never expire, and more.
Disclaimer - The above content is non-editorial, and ET hereby disclaims any and all warranties, expressed or implied, relating to it and does not guarantee, vouch for or necessarily endorse any of the content.
