Credit Card Declined - Reasons Why Your Application Got Rejected I Kotak Bank
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22 NOVEMBER, 2021

Credit Card Application Decline - Reasons Why Your Application Got Rejected

Credit cards can help you in times of need. It can also boost the routine of one’s spending. A credit card can be applied by-

  • Visiting the bank directly
  • By applying for it online

The credit card application process is simple. You can file the application with minimum hassle. In some cases, the card application gets declined due to incorrect information or low eligibility.

Credit card application declinecan be avoided if certain aspects are looked into carefully before applying.

The following are six common reasons why a credit card application is declined-

1. Past Records of Bad Credit

Credit history has a big impact on your application. One of the crucial aspects that decide whether the credit card application will be declined or accepted is credit history.

When you apply for a credit card, banks check your credit history to determine your creditworthiness and if found to be low, your credit card application will be rejected. Your credit history is a record of your profile as a borrower. It comes with a credit score that denotes whether one is creditworthy or not. It basically sums up the ability to repay.

Your credit score is a three-digit number, between the range of 300-900. Any credit score above 700 is considered to be good, portraying a healthy borrower. If your credit score is less than 600, it becomes a red flag for lenders. If your credit score is low, here is what you can do:

a. Pay off smaller loans: Prepay your smaller loans to become debt free.

b. Pay your bills on time: if you have an existing credit card or a loan, make timely payments to show that you are a responsible borrower.

It may take up to 6 months to a year of good credit behaviour to positively affect your credit score.

2. Fresh credit records

When a person is applying for a credit card or loan for the first time, their credit history and credit score begins with zero.

As mentioned earlier, a credit score is used to judge the creditworthiness of a person. This score shows whether the person makes his credit payments on time or not. The score allows the lenders to make a decision regarding offering/issuing loans or credit cards.

As credit cards need to be maintained with duly paid bills, banks usually refer to the credit history or score. Therefore, if a person has no credit history, there is a possibility of their application being denied.

However, this issue can be avoided. It is always advised to apply for a credit card in a bank where one has an active account. As the bank will already have records of the account’s history, they can understand the applicant’s spending habits.

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3. Belonging to a Low Income Group

Income is a significant factor in credit card requirements.

When one comes from a low-income background, the chances of a credit card application getting declined become higher. The minimum benchmark salary that one requires to get a credit card depends on the credit company and the credit card you choose.

In short, the application of a credit card has more chances to be declined when-

  • The applicant comes from a low-income background
  • The applicant is not meeting the income requirements set by the credit card issuer

4. Unsatisfactory Employment Documentation Records

Another credit card requirement is employment records.

Financial institutions, while issuing a credit card, look into the employment records too. The chances of a credit card declined are high if-

  • The applicant works in a private company that is non-listed
  • The applicant works in a company or a firm that is unknown

Such applicants are seen as high-risk individuals by credit card issuers. They are seen as high risk because of the possibility of -

  • Fluctuating incomes
  • Exaggerated job titles or designations

This being one of the most common reasons why a credit card application is cancelled. Such reasons impact the credibility of the applicant.

5. Errors in The Application

An application form is an important aspect when it comes to applying for a credit card. It is a minor aspect, but this is the first step in the whole process.

Mistakes in the application form can lead to the declination of the credit card request. Some of the common errors in the application include (but are not limited to)-

  • Missing out on essential information
  • Entering the wrong details

It is always good to double-check the application so that it can be submitted without any errors.

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6. Possessing Multiple Credit Cards

When a person has multiple existing credit cards in their name, they have a lower chance of credit card approval.

A good ratio between debt and income is what really convinces the credit card issuers to approve or decline the request. If there is an excessive flow of money towards previous credit cards or loans, the creditworthiness of the applicant is compromised.

What else has an impact on the declination of a credit card application is when-

  • The applicant frequently transfer his/her credit card balances
  • The applicants often upgrade their credit cards

Other miscellaneous causes of a credit card application declination are-

  • Failed verification of the applicant’s location
  • Various loans that have been taken from multiple financial institutions or lenders

Every credit card issuer has its own set of rules and regulations and terms and conditions. If the applicant follows them all, the chances of their credit card application being accepted are high. Failure of the same can result in a declined application.

The rejection of a credit card application can be avoided by being more educated of the process.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.