Everyone knows that credit cards are a great way to build credit and make purchases. But what is less known is how you can get declined for one.
There are many reasons why people may get declined on an application. If you have applied for a new card and got rejected, here are some of the top reasons this might happen.
- 1 You Submitted an Incomplete Application Form
- 2 You’re Too Young for a Credit Card
- 3 Your Employment History Is Short
- 4 Your Income Is Not Enough
- 5 Your Credit Rating Is Too Low
- 6 Your Credit History Is a “Thin File” or Limited
- 7 Your Credit Report Has Too Many Applications
- 8 You Have a High Loan Balance
- 9 You Have a Lot of Credit Cards
- 10 You Have a Recent Public Record
- 11 You Have a History of Delinquent Payments
- 12 A Charge-off Has Been Placed on Your Credit Report
You Submitted an Incomplete Application Form
Providing incomplete information in your application makes you more likely to get denied. But you can avoid it by applying online.
The majority of online credit card applications won’t let you submit incomplete information.
When you apply for a credit card in person, make sure to check it twice or three times.
You’re Too Young for a Credit Card
Individuals who are 18 years old get low chances of approval on a credit card application. But there are some exceptions.
It could be possible to get a credit card only if you can prove that you have your income.
You may also get approved if you’re added as an authorised user to your parents’ credit card.
Your Employment History Is Short
Your credit card application could get denied due to unstable work history. Credit card issuers consider applicants who can show they can pay their debts.
If you’ve been between jobs and have been out of work for a long time, you may have difficulty getting approved.
Your Income Is Not Enough
Credit card issuers need different income levels for credit cards. Your application can get declined if you do not have enough income to support the credit card.
If you cannot show enough proof of income, your application may get denied. Banks have different income rules, so you have to gauge what credit cards may be good for you.
Your Credit Rating Is Too Low
It is crucial to have a high credit score. Low credit scores show that you have difficulty repaying loans and debt.
Your credit score may be low if you exceed your credit limit. Or, maybe you exceed your due payment dates.
The credit score reflects your payment history, as Credit Bureau Singapore explains. It contains information that financial institutions can use to assess a person’s creditworthiness.
Keeping a positive credit rating can help you avoid getting declined. To do that, you have to make a habit of repaying your debts on time.
Your Credit History Is a “Thin File” or Limited
Poor credit history gives a red-flag impression to credit card issuers. Most applicants who have a low rating on credit history don’t get approval.
There must be one open account in your credit report for FICO to calculate your credit score.
The credit card company can’t determine your creditworthiness without a credit score. That’s why new customers who don’t have any records yet are more likely to get declined.
Get your credit history started by applying for a secured credit card. A student credit card is also a great option if you are building your credit history.
Your Credit Report Has Too Many Applications
Applying for several credit cards in a short period isn’t good. Even if you receive a credit card from another company, it isn’t a healthy move. It’s one factor why other applicants declined to apply.
The number of inquiries you make doesn’t affect your approval. If you are trying to get a new credit card, it is better to limit your credit card applications.
You Have a High Loan Balance
It can be more difficult for you to apply for a new credit card when you have too much debt already.
Credit card companies might be reluctant to extend you a credit card if your loan balances are high. If you pay off your loan balances, you’ll get a high chance of getting approved.
You Have a Lot of Credit Cards
Even if they aren’t used, the risk of having too many open credit lines can get you denied. It can hurt your score and make you appear to be a credit risk.
Opening new credit cards can sometimes improve your credit score. It can happen if the new cards help to reduce your credit utilisation ratio.
It’s essential to keep a low credit utilisation ratio if you want to maintain a healthy credit score. In general, you don’t want your ratio to exceed 30%.
If you want an excellent credit score, experts recommend staying below 10%.
You Have a Recent Public Record
There are different ways public records can impact your credit score. It could be Bankruptcies, judgments, or liens.
Other factors are lawsuits and foreclosures. Anything a company may consider a legal liability is made public. Most likely, they will show up in your credit report.
As time passes, collections and public records can begin to lessen the effect they have on your credit score.
But, public records and recent collections can adversely affect your approval chances.
This severe delinquency sends a negative signal to the credit card company. It shows that you don’t have enough money to cover your obligations.
You Have a History of Delinquent Payments
The delinquency on your credit report is not the only factor credit card companies look at. They also consider how long it has been since your last incident of delinquency.
Recent payment history reflects how you’ll handle new credit obligations better than past payment history.
After six months, you fall behind on your payments. That hurts your chances of approval more than the same delinquency six years ago.
The best thing you can do if you plan to apply for a new credit card soon is pay your existing loans on time.
A Charge-off Has Been Placed on Your Credit Report
Charge-off means the credit grantor has closed your account. That means it can no longer be used. Accounts with a status of “charge-off” are closed for future use, though there is still a balance owed.
Credit cards that got charged off are those that went unpaid for six months or more. It reflects negatively on a credit report.
A credit card company would be reluctant to offer you a credit card if you did not take care of a previous credit card.
Don’t feel bad or low whenever you get rejected from credit card applications. If you need extra money to pay for something urgent, you can seek help from other sources like Cash Mart.
It’s a licensed money lender in Yishun that strictly follows the Moneylenders Act. Just like in banks, you can rely on them anytime you need financial help.
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