Applying for a credit card these days is as simple as calling up a friend. It just needs a click of a mouse. In fact, lot of times you don’t even need to apply for it. You keep getting calls that a credit card has been pre-approved for you. Whether it is a pre-approved card or one that you apply for, there is a certain process that happens before you receive your credit card. Every credit card company takes certain factors into account before accepting or rejecting your credit card application. Let’s look into some of the possible reasons for your credit card application getting declined.
Reason 1 – Bad credit score
This is the number 1 reason behind credit card applications being rejected by companies. Credit score has become a huge factor behind issuance of loans and credit cards. A lot of institutions seek a minimum credit score for treating the customer as trustworthy in terms of paying back the credit taken from them. Minimum credit score needed for approval is usually 750+. There could be multiple reasons for having a bad credit score. Some of the reasons could be – You might have applied with multiple lenders, delayed EMI payments, defaulted on previous loans and so on. In fact, you might not have a score at all if you do not have an existing loan. Even in such cases, your credit card application could be rejected.
(Also see: 6 ways to deal with mounting credit card debt)
Reason 2 – Low Income
Credit card companies always compete to offer credit cards with higher credit limits. However, they will gauge your repayment capacity beforehand. You would be asked to submit income proofs such as IT returns/salary slips for past few months/form 16 along with the credit card application. Minimum salary specified by the lenders is usually in the range of Rs. 84,000 – 1,50,000 p.a. Your application is sure to get rejected if you don’t fall within these limits. Even if you fall within this range, there is no guarantee that your credit card will be approved (read the eligibility conditions of the credit card before applying).
Reason 3 – Occupation
Certain occupations are not treated positively by the credit card companies. Past experiences from such type of jobs may not have been great for the companies. Hence, they tend to reject applications from employees of such occupations though they fulfill the minimum criteria needed. Reputation of the organization would also be an important factor for the credit card issuer. If you earn a decent salary but work with not so reputed company, the card issuing organization may not feel secure in lending to you.
Reason 4 – Mistakes in the application form
This is a common error that a lot of people make. Simple errors while filling the application form can lead to rejection of the product you need. It could be company name, location, income or anything else which the company fees necessary.
Reason 5 – Having multiple cards
If you already have multiple credit cards, your credit application could well be declined. Companies prefer people who can service debt comfortably. Having multiple credit cards could make the issuer feel you are likely to land in trouble soon. Credit card companies also want you to stick to the credit card. Hence, they do not prefer those who frequently opt for balance transfer options for the existing cards.
Reason 6 – Physical verification
The final step for the credit card company would be a physical verification of the employee. It would send people to verify your home and office address. The addresses specified in the application should be right. It will also give them a sense of your lifestyle.
These are some of the possible reasons behind rejection of credit card applications. It is not mandatory for lenders to disclose the exact reasons behind this. Apart from the above said reasons, do read the terms and conditions before applying for credit cards. Some things may not be changed. But, if you have a bad credit score, you can definitely start working on it. Also, there is no hard and fast rule that every credit card company should treat you in the same way. It varies from lender to lender. Finally, have a healthy credit for a healthy financial life.