Applied for a credit card and the application got rejected? If yes, then you must be wondering about what went wrong in the whole process. Has the bank explained you the reason?
If not, then here is what could have played a spoil sport in your case. See if you can find a reason for yourself and correct it before re-applying.
- Poor credit history: One of the most common and prominent cause of rejection is poor repayment records. Every bank checks your credit history (CIBIL reports) before taking a decision. If you have defaulted multiple times on your repayments of any type of credit – be it home loan, personal loan etc. or old credit card, then you are bound to face this rejection.
Solution: You have no other way than to come in the good books of bank by paying your EMI’s and credit card payments on time for at-least 6 months in a row. This will definitely help in improving your credit history and you will be eligible for new credit.
- Low level of income: Banks look at your spending power i.e. the money which you have at your disposal for making purchases. If you do not earn sufficient as per their norms, they would not like to make you a credit card client. Normally the income range that most banks look for is minimum of INR 1,80,000 per annum. This can go up substantially in case of self employed people.
Solution: I think this needs no explanation. You need to increase your income levels to enjoy the benefits of credit card.
- No credit history: Yes, it may happen that you are the lucky one who has never taken a loan or applying for a credit card for the first time. Since, you have not taken any form of credit, you do not have any record with CIBIL. Banks are normally cautious in this kind of cases as they cannot determine your repayment behavior in the absence of credit records.
Solution: Hmm..this is quite trivial as you cannot get a history unless you actually get a loan or a credit card. But something needs to be done to get that first hit. The best way out is to apply for a loan or a credit card from a bank whom you have a long relationship of either having a savings account or a salary account. This is the bank who is going to trust you more than any other bank without a credit history. Once you get a card from this bank, your credit record will be automatically created in CIBIL for future references.
Or the other option is to opt for secured credit card. They certainly help you kick start your credit score.
- Area Of residence: Living in a good locality pays here too. Banks do follow a list of areas which details the number of defaulters from different areas. They also blacklist areas which have produced most defaulters for future issue of credit cards and loans. Hence, if you live in such a blacklisted area, you won’t get the plastic money!
Solution: It is difficult to get over this limitation unless you change your area. If you can back up your application with good repayment records and good income, you might get over the blacklist tag. But the best option is to move.
- Past application rejections: Are you eager to get a credit card and hence have applied for any or all of them? If yes, then you definitely have the multiple application markers in your CIBIL report. Every time you make an application for a credit (card or loan), the bank sends the application information to CIBIL. Any bank can see this record when they receive your application.
The chances are high that your most card applications get rejected in this scenario and hence would create a bad impression on other bank and hence could lead to another rejection.
Solution: Do NOT apply for every other credit card. You might be tempted by credit card marketing executives in retail stores or over marketing calls everyday but learn to say NO. You should ideally not apply for more than 2-3 cards to maintain a good credit card record.
- High exposure to credit: If you already own multiple credit cards or are possessing multiple loans, you obviously have high exposure to credit. If your income levels are not sufficient to service all those credit lines, bank may not feel secure enough to help you with a new card.
Solution: Try to close as many credit lines as possible at the earliest. It is always in your favor to finish off loans on time to reduce your credit exposure. This also improves your credit score considerably.
- Multiple balance transfers: Balance transfer is a game that many smart minds like to play. But if you do it regularly, then it obviously sparks a thought in mind that you are trying to out-smart the facility available to you. Banks want to earn through the issue of credit card and do not want you to play a game. Hence, they may not find you suitable for their business objective.
Solution: Hmm..This is also self explanatory. You should use the balance transfer facility for what it is made for. Do not try to manipulate and avoid doing the transfers all the time.
- Age barrier: Minor’s and senior citizen are considered dependent in our country and hence they may not be able to secure a credit for themselves. Minors do not have income to support the cause but it is strange that people over 70 also have high rejection rates. Unless you have good worth and regular flow of income, your application is most likely to be rejected.
Solution: Well..If you are a minor, you need to wait and if you are a senior citizen, you have to either show good source of income or get an add-on card with the help of your earning child.
- Company is not listed on stock exchange: This may sound weird but companies listed on stock exchange have most vested trust than non-traded companies. Banks are not sure about the company’s long term prospects and hence feel that it can vanish anytime. If you work in a non- traded company, your salary is also attached to the company’s well doing. If bank’s internal policies do not allow to take this kind of risk, they might reject your card application.
Solution: Switch to a stock exchange listed company :). If you can’t or don’t want to switch company, best option is to apply in bank which is keeping your savings or salary accounts.
- Home address is in defaulter list: You have recently shifted to a new house in a good locality on rent and applied for a credit card. The application gets rejected. Well, the residence address could be a reason here.Why? the earlier tenants might have defaulted on repayments on various occasions and bank has blacklisted the address itself.Obviously, you cannot help what other people have done, but it certainly can affect your prospects!!
Solution: Change the house is the best option. If you can’t change, you can try to convince the bank with your good salary and past repayment records.
We have problems but we have solutions too!! The crux of the matter is that bank always wants to make sure that it can earn by issuing a credit card and get its money back from you. If they feel that there are chances of loosing money because your profile does not look promising, they would NOT issue a credit card to you.
Credit history is a great tool to identify one’s behavior and past records. You should always strive to keep it in good shape to enjoy banking benefits!