28 December 2011

Top 10 reasons for credit card rejection

Traveling and dining is never same when you have an access to a credit card. It's true that credit cards have become important sources of identification even if you want to rent a car for example; you really need a major credit card. To fulfill these desires every one wishes to have a credit card with them.

Nitin who is a Senior Executive currently working for an IT firm had never thought of buying a credit card. But after repeated calls from different banks he finally decides to apply for a credit card. But for his surprise his credit card application was rejected despite of his good income and good credit score. Like Nitin

Bad Credit Score




One of the most prominent reasons for rejection of credit card applications is bad credit ratings. In the past if you have taken any loans or mortgages from the bank or have been using a credit card already, you would have build your credit rating. You acquire a good credit card rating only when you make your payments in time. Trouble enters only when you are irregular and defaulty in your payments. This creates a bad credit rating that is calculated by CIBIL. All credit card applications are checked for the credit rating. You need to have a score above 720. If it comes up as negative, the application is rejected out rightly. Most of the banks consider CIBIL score before giving a credit card.

  
Age barrier




If your credit card is being rejected it could either be that you are a Minor or a senior citizen. Because Minor's and senior citizens are considered dependents and hence they may not be able to secure a credit for themselves. Unless the senior citizens show a good source of income they can't avail a credit card. Minors do not have income to support themselves. People over 70 also have high rejection rates. You should have a regular flow of income; else your application is most likely to be rejected.

  
Low level of income




The credit card companies have restricted the sale of credit cards due to the hike in the card defaults. Now credit card is offered to people who have income above a certain level mostly above 2.4 Lakhs annually. Banks also look at your spending power, the money which you have at your disposal for making card purchases. If you do not earn sufficient as per their own norms, they would not like to make you a credit card client.


Home address is in defaulter list




You may be surprised to know that your application was rejected because of the place you currently residing in. The reason could be because of the tenants who were residing prior to you might have defaulted on repayments on various occasions and bank has blacklisted the address itself. So it's not only the income but also locality that counts when you apply for a credit card.

  
Multiple balance transfers




Balance transfer is a game that many smart minds like to play. But this act can't cost you if done on a regular basis. Because the banks want to earn through the issue of credit card and do not want you to play a game in the same way. Hence, they may not find you appropriate for their business objective.


No credit history




You may be thinking that you have never taken a loan nor a credit card, and this will impress the bank and they will issue the credit card to you. But that doesn't work. Since, you have not taken any form of credit, you do not have any record with CIBIL. Banks are normally cautious in this kind of cases because they have no idea of your repayment behavior. So the best way out is to apply for a loan or a credit card from a bank whom you have a long relationship of either having a savings account or a salary account. This is the bank who is going to trust you more than any other bank without a credit history.

  
Error in filing application




Even if you undertake a task with complete concentration it's obvious for some minute errors to occur. The error could be committed by you in filling up the credit card application. It could be a incorrect number you entered or incorrect pin code of your area. These minute reasons could cause a rejection to your credit card application.


Past application rejections




Every time you send an application for a credit (card or loan), the bank sends the application information to CIBIL. All banks can see this record when they receive your application. If earlier your credit card applications was rejected the chances are high that this time also your application will be rejected because the banks have a bad impression. So don't apply for more than 2-3 cards to maintain a good credit card record.


High exposure to credit




Having multiple credit cards or multiple loans can also be a reason. Because you obviously have high exposure to credit. If your income levels are not sufficient to service all those credit lines, bank may be reluctant in issuing the new card to you. So finish off loans on time to reduce your credit exposure. This also improves your credit score considerably.

  
Negative Contact Point Verification




Before issuing a credit card most of the credit card companies do a physical verification of home and office of the applicant before issuing a card. During the verification if the officer feels that the applicant's job is not secure or his living standard is low, the card application is rejected. Even if you are living single or alone this could also be one reason for credit card being rejected.