In today’s rapidly evolving credit environment, securing a credit card and using it properly can boost financial stability. Still, it has been observed that several applicants face unexpected rejections when trying to secure credit cards.
This makes it essential for aspiring credit card applicants to understand the fundamental reasons for such rejections, as it can help not only improve approval chances but also strengthen their credit profile. Below are a few reasons why one’s credit card application can get rejected.
5 major reasons for rejection of credit card applications
1. Weak credit history
A credit card application is closely tied to your credit history:
- Lenders favour a track record of responsible credit use. A low or limited credit history can result in the rejection of a credit card application.
- Recent defaults or delayed repayments. Even a single missed payment can signal serious risk to issuers.
- Utilising a large portion of your permitted credit can bring down your creditworthiness. A very high credit utilisation is a red flag that can result in rejection of a credit card application.
2. Insufficient income or employment instability
Your ability to repay is fundamental:
3. High existing debt burden
Too many liabilities, pending loans can dampen approval chances:
- If the applicant already has a high debt-to-income ratio and multiple active credit cards or personal loans, lending institutions may hesitate to approve credit card applications.
- Such a behaviour might be viewed by lending institutions as a clear sign of credit hunger. That is why availing too many loans is never encouraged. Your total loan outgo on a monthly basis should not exceed 30% of your monthly income.
4. Errors in application submission or documentation
Accuracy matters in every submission:
- Even minor mistakes or errors in official records, such as incorrect name spellings, Aadhaar details, or PAN details, can cause rejection.
- Missing proofs of identity, address or income often stall approval chances and complicate future credit card applications. Incomplete KYC documents can provide a clear basis for rejecting credit card or loan applications.
5. Age and eligibility constraints
Eligibility criteria vary across issuers. Not meeting them can force rejections:
Understanding credit card risks
In conclusion, credit cards can provide comfort, convenience, and financial flexibility, but misuse can result in high interest rates, mounting debt, and a declining credit score. Applicants should evaluate their spending habits, understand common reasons for rejection, and prioritise repayment discipline before applying. Doing so not only improves approval chances but also fosters healthier credit habits.
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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.
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