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Top Reasons for Credit Card Rejection You Should Know

credit card rejection

A credit card has many advantages to the cardholder. A credit card is an unsecured loan that is typically obtained by someone who is new to the workforce. Credit cards are a convenient way to get money quickly without having to wait for the approval.

Even though everyone wants a credit card, getting one is difficult. As previously stated, a credit card is an unsecured loan that does not require any form of security, posing a significant risk to banks. Before a credit card application is authorised, banks will have a set of requirements that a person must meet. The causes for credit card denial are listed below.

Criteria for credit card rejection

The rejection criteria for credit cards can be due to two main reasons that are listed below-

  • low credit score-

The credit score is a total score based on how well you paid back your loan or credit card bill on time. Your credit card will be declined if your credit score is too low.

Before applying for a credit card, it’s a good idea to check your credit score, create a credit profile, and understand your credit situation. This way, if you have a low score, you can improve it before applying.

  • Eligibility criteria for a credit card-

Each bank’s credit card programmes have its own internal eligibility rules. They are based on your pay, where you work, who you work for, your experience, and other factors that each application must meet when you apply for your first credit card.  The credit card application will be refused if any person does not meet this requirement

Job hopping

If a person changes employment frequently, such as every six months or a year, it gives the impression that the candidate is untrustworthy. The bank may reject your application in such instances.

Insufficient income

A credit card’s salary is a critical consideration. Therefore, your application will be denied if you do not meet the bank’s salary requirements.

There’s also the possibility that, despite having a larger income, your application was turned down. This is because you may have less disposable income, which may not meet the bank’s requirements. For example, if an emergency arises, you will not have enough salary balance.

Mistakes in the application form

Even though it seems to be a minor issue, inaccuracies on the application form can cause a credit card application to be rejected. Unfortunately, many applicants make this mistake when filling out the application form, such as missing important information, providing incorrect information, etc. This is why applying for a credit card online is preferable, because online card applications remind the applicant to fill up any necessary fields that have been left blank.

Late payments or credit report inconsistencies

A credit report comprises the whole history of your loans or credit cards, as well as information about how timely you paid back your credit, any late payments, and so on. Your application will not be passed if you have the terms “settled” or “written off” against any credit account, as these terms indicate that you have defaulted on a loan or credit card due payment and that the bank has settled the account knowing that the customer will not pay back the balance.

What impact will credit card refusal have on your credit score?

Based on the application processing stage you are at, there are two scenarios to describe how credit card denial or disapproval would affect credit rating.

First scenario: You go to the bank or go to their website to inquire about credit card processing fees, interest rates, and so on. As a first check, the bank will pull your credit score from various sources. This is known as a soft inquiry, and it has no bearing on your credit score.

Second scenario: Your credit card application will be rejected if the bank obtains your credit score and credit history directly from any of India’s credit agencies and discovers that your credit score is low. The term “hard inquiry” refers to this style of investigation. And it is this difficult inquiry that will have an impact on your credit score.

Keep the following things in your mind before you get your first credit card.

  • Learn everything there is to know about credit cards and then pick the best decision for yourself based on your requirements.
  • Only apply for a credit card if you are sure of your ability to maintain a steady income, whether or not you are employed.
  • Begin with a minimal credit limit on your first credit card. This will ensure that you just charge a small amount on your card and do not get into any debt traps in the future.
  • Because this would be your first credit card, you should be particularly vigilant when it comes to the card’s crucial terms and conditions. It’s possible that the bank agent will not point out all of the additional hidden costs to you right away.
  • Understand the complete concept of the annual percentage range.

The bottom line

These factors may have contributed to your credit card applications being denied. Lenders are not required to reveal the reason for a credit card application’s rejection. Apart from these specific reasons, an applicant should read the credit card issuer’s terms and conditions before applying for a credit card.

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