Credit cards are the most common sources of finance which helps people to realise their desires. At times, they also provide the much needed support to tide over financial difficulties. However, at times people face a situation when their credit cards applications get rejected. What baffles many in such circumstances is the fact that even after repeated queries regarding the reason for such rejections, card issuers often do not explain these reasons to applicants.
We list some of the most common grounds on which card issuers reject credit card applications in India, along with tips on how to overcome these hurdles.
1. Poor credit history
Photograph: Petr Kratochvil/Wikimedia Commons
Past credit repayment record of the applicant is an important criteria on which banks decide whether or not to issue a credit card to the applicant. All card issuers check the applicant's credit history (CIBIL report) before making a call as to whether or not to issue the plastic card. In case, a person has failed to repay any of her/his old dues timely, it will reflect in his/her CIBIL record, seeing which banks could reject the credit card application.
To overcome this hurdle, a person should make efforts to improve her/his credit score/ CIBIL record by paying back all dues. To come in the good books of the banks, timely payments on loans or credit card expenses have to be made for at least six months continuously.
A person can also use credit cards to improve his/her credit score.
2. No credit history
Another common reason for facing rejection from card issuers is the lack of a credit history. It means that those individuals, who have never taken a loan or credit card, can also be rejected by credit card issuers. It is because of the simple reason that if a person has never taken any type of credit, s/he will not have any record with CIBIL.
These cases are considered risky by banks as there is no record of such an individual's credit repayment behaviour.
In this situation, it is advised to apply for a credit card from a bank with which a person already has a relationship, like a salary account or savings account.
Despite having no credit history, this bank will trust the applicant more than other banks.
3. Existing level of credit exposure
Generally, card issuers trace the number of existing unpaid loans or credit cards an individual already possesses. If a person is already having multiple credit cards, or is servicing several loans at a time, there are high chances of her/his new credit card application getting rejected. Banks consider applicants with high exposure to any type of credit (loans, credit cards) as risky.
4. Several balance transfers
Those having a history of multiple balance transfers may find it difficult to get a credit card. Credit card issuing companies want to earn by the cards that they are issuing and do not want to get outsmarted by their customers who repeatedly avail the balance transfer facility.
Therefore, they may not issue cards to applicants who have transferred the balance on their loans many times.
5. Employed in a non-listed company
Individual's working in non-listed private firms may find it difficult to get a credit card. Usually, banks identify people serving in non-listed companies as people with high risk profiles.
Lending institutions feel that people falling under this category have issues such as income fluctuations, unemployment in case of unexpected closing down of the unit, designation exaggeration etc.
However, applicants with a good credit history, high income levels and stability in income may see their applications getting accepted by banks.
6. Profession or area of residence in defaulter's list
At times, credit card companies reject a card application merely because the applicant's profession or area of residence falls in the blacklisted/defaulter's list.
Though, with the availability of credit reports this practice is declining quickly, those who want a credit card but are facing this problem, can go for secured credit cards.
Secured credit cards are those credit cards which are issued against fixed deposits in a bank.
7. Income level
All credit card issuers have a minimum eligibility requirement which has to be fulfilled by prospective customers who want to own a credit card. If an individual is earning below a card issuer's eligibility norms, her/his application is bound to get rejected. In these cases also, secured credit cards come in handy.
Normally in India, banks issue credit cards to those people who earn more than Rs 180,000 annually.
8. Age restrictions
Credit card companies consider minors and senior citizens as dependents lacking sufficient funds to secure credit. So, in India, card issuers are not willing to issue credit cards to applicants falling in these categories. However, if senior citizens can show good source of income, then banks may accept their applications.
If an individual's application gets rejected due to this reason, s/he can go for an add-on credit card with a relative's credit card being the primary card.
The main thing to keep in mind while applying for a credit card is that an applicant has to convince the card issuers that s/he has the ability to repay credit dues on time and that the card issuers will not lose any money by issuing the card to the applicant.