Your Credit Card Application Got Denied? 5 Probable Reasons To Explore

Applying for a credit card can be an exciting step towards a new path of financial freedom. With credit cards becoming more popular – the total number of cards issued in the Indian market reached 100 million as of February 2024 – the number of applications banks receive is also getting high.

However, it can be disappointing when your credit card application is rejected. While most banks have clear criteria for approval, many factors can contribute to an application denial.

If your application has been rejected, it may be a good idea to identify the reasons first and then resolve any potential issues before reapplying.

In this article, we will look at some common reasons why your application for a credit card may be rejected, and what you can do to make sure it doesn’t happen the next time.

5 Reasons Your Credit Card Application May Be Rejected

The following reasons can be major road-blockers in your credit card journey:

1. Low Credit Score

A low credit score is one of the most common reasons for being denied a credit card. Your credit score reflects your financial reliability. It tells the bank how responsible you are with credit. Hence, lenders use it to assess the risk of lending. If your score is below the acceptable limit, issuers may reject your application.

For instance, a score below 650-700 might signal to the bank that you have struggled with repayments in the past. This can make you a high-risk applicant.

How to address this: Focus on building your credit score by paying off existing debts and reducing credit utilisation, which can lead to a better score.

2. High Existing Debt

If you already have a significant amount of debt, banks might hesitate to approve your credit card application. A major aspect you should know about is your debt-to-income ratio, which compares how much you owe to lenders versus how much you earn in a specific period. A high ratio implies that a significant portion of your income already goes into paying off existing obligations.

Even if you are managing payments on time, the additional debt might make you less appealing to a new lender.

How to address this: Try paying down some of your existing debts to lower your financial burden before reapplying.

3. Inability to Meet Card-Specific Eligibility Criteria

Along with the bank’s general criteria, the credit card will also have its specific requirements, especially regarding the applicant’s income. Premium credit cards require higher incomes. If you do not meet the card-specific requirements, your credit card application could be rejected.

How to address this: Study the eligibility requirements thoroughly before applying for a card. You can also consider alternatives like the RuPay credit card, which may have more flexible criteria while still offering excellent features.

4. Incomplete or Incorrect Application Details

Sometimes, you may be denied a credit card because of errors or incompleteness of the submitted information. For instance, you may have erroneously mentioned your income to be a certain amount, but your salary slips may show something else.

Missing documents or discrepancies between the information and official records can also raise red flags for the lender.

How to address this: Double-check your application before submitting. Ensure all information is clear and valid and that all required documents are included.

5. Unstable Employment History

Similar to your income, your employment history also tells the lender how reliable you are as an applicant. If you have a stable employment history, it shows the lender you are dedicated towards your earning potential and are likely to repay the credit card dues on time. Frequent changes in jobs or major employment gaps in your resume may lead to your credit card application being rejected.

If you have recently started a new job and your probation period has not ended, the bank might wait until you establish more stability before approving your application.

How to address this: If you are in a new role, consider waiting until you complete a few months of employment before applying again.

What To Do Next If Your Credit Card Application Is Denied?

Having your credit card application rejected is not the end of the road. Here’s a step-by-step guide to improve your chances of approval:

1. Understand the Reason for Rejection

Start by contacting the bank or issuer to ask why they denied your credit card application. Most banks are transparent and will provide specific reasons, such as a low credit score or a missing document.

2. Check Your Credit Report

Review the credit report and look for errors, inconsistencies, or outdated information that might have affected your credit score. You can then dispute inaccuracies to make things right.

3. Improve Your Financial Health

These small steps can go a long way:

- Pay down existing debts to lower your debt-to-income ratio.

- Build a habit of paying bills and EMIs on time.

- Avoid applying for multiple loans or credit cards at one time.

4. Consider Secured Credit Cards

If you struggle to get approval for an unsecured card, you can opt for a secured credit card. These are linked to a fixed deposit and are easier to obtain, even with a lower credit score. You can also use them to rebuild your credit history over time.

If you are ready to try again, IndusInd Bank offers a wide range of credit cards tailored to different needs. With easy eligibility criteria, a 100% digital application process, reward points that never expire, cashback offers and waivers, and more, your new credit card journey is bound to be a smooth one with IndusInd Bank.

Conclusion

Being denied a credit card of your choice can be discouraging. However, all does not end there. Understand the reasons behind the rejection, address any issues if needed, and take actionable steps. With the right approach, you will turn a rejection into approval.

(This article was written by Brand Desk.)