Sometimes, credit card applications get rejected. This could be due to various reasons like lack of income, low credit score, inaccurate information in your credit card application, and so on. 

Reasons Why A Credit Card Application Is Rejected

Your Credit Score May Be Low

Before approving any loan or credit card application, lenders usually look at the credit score. If your credit score is high, the chances of your credit request getting approved are higher. On the other hand, if your credit score is low, your credit card application may get rejected.

Credit card applications for individuals with a credit score below 550 may most probably be rejected. This is usually considered a bad score and you have to work on improving it. For credit scores above 750 plus, we can confidently say that the credit card application will be approved subject to other factors that influence the approval of the application.  

Low Income 

You must fulfill the income criteria set by the lender. You must also give proofs such as Form 16, salary slips, and income tax returns to corroborate your income. Many lenders are willing to lend credit cards with preferential credit limits also. But not fulfilling the income criteria and not substantiating it with appropriate documents could lead to rejection. 

Occupation

Occupation is another important factor that affects the credit card application approval. Even if you fulfill all the other criteria, the reputation of the company is important. Also, if you have an unstable work history, it will affect the approval of your credit card application negatively. 

Multiple Applications For Credit Cards 

Whenever you apply for a credit card, the lender will conduct something called a hard inquiry. This is when a lender requests the credit bureau about the person’s credit history. Each time a hard inquiry is conducted, it will get entered into your credit report. Multiple hard inquiries on your credit report will show you as credit hungry.

Lenders will perceive that you cannot manage your finances without depending on credit. You will be seen as someone who ends up spending more than you can pay off. You may be seen as a risky borrower and this may lead to the rejection of your credit card application. 

No Credit History

If you have not got any debt so far, you will not have a credit history. This may lead to the rejection of your credit card application because banks do not have any possible way of evaluating your creditworthiness. They cannot ascertain how you will handle credit and whether you will be able to repay your loan on time. 

Errors in the application form

Mistakes and omissions in your credit card application may lead to rejection of the credit card application. It may be only a small mistake, but still, it may lead to the rejection of the credit card application.

Many applicants make errors while filling out the application form such as missing out on important information, entering wrong details, etc. That is why you should fill your application online. When done online, the credit card application will prompt you when any mandatory details are left unfilled.

Residential and Office Address Verification

Lenders verify both the office and residential address before approving the credit card application. So, when officials from the lender’s office come to your home or office for address verification, you should ensure that nothing goes wrong. It is very important that you give the correct addresses of your office and home in your application form. 

What Can You Do When Your Credit Card Application is Rejected? – 

• Check the adverse action letter: When your credit card application is rejected, the bank sends you an adverse action letter stating the reasons for the rejection. Check these and correct them before you apply for the credit card again. For instance, if the reason is a low credit score, you can download a free credit report and cross-check the information. Then you can work towards improving your credit score. 

• Apply For A Secured Credit Card:  A secured credit card is a card that can be obtained against your fixed deposit. The bank will issue the card with the credit limit against your fixed deposit. You can avoid rejection in this way. If you repay your bills on time and maintain a good relationship with the bank, the bank may convert your secured credit card into an unsecured one in the future.

• Apply For A Plain Vanilla Card: You can get a basic credit card whose eligibility criteria you can meet easily. You can use this card for the time being and improve your credit history by repaying without defaults. By doing this, you can apply for a better card later.

• Get BNPL Cards: Buy Now Pay Later (BNPL) is a funding option that provides eligible shoppers with an instant credit limit depending on their bank account and past purchases. You can avail the BNPL option against your credit card. This money is usually repaid free of interest in 30 days. Users can also pay it back in three, six, nine, or twelve easy EMIs at a low interest rate. Some of the popular BNPL apps include CashE, LazyPay, Flipkart Pay Later, and so on. 

• Reapply Only After Taking Appropriate Remedial Measures: Once you have identified the problem and ensured that you have corrected it, you can reapply for the loan.  For example, if your credit score is low, you should have enhanced it. Before applying, check if there is enough balance on your credit card and limit new applications for other cards. When you submit your income eligibility details, also include income you get from other sources also. This will increase your chances of credit card application approval. 

Conclusion

Repeated rejection will have a negative impact on your credit history and is detrimental to obtaining credit in the future. So, ensure that you have everything in place before you apply for the credit card so that you fulfill the eligibility criteria set by the lender.