Rohan wanted to buy a gaming console for quite some time but he could not afford to pay for it upfront. He applied for a credit card with HDFC Bank through their website and submitted the documents. But after a few days when he went online to check his HDFC credit card application status, he found that it was rejected. Rohan could not understand why this happened and he immediately applied for two more credit cards only to get rejected again. What Rohan did not realize was that these rejections were severely impacting his credit score. So, in the end he was left with no credit card and a poor credit score.
A rejected application may be disappointing but it is certainly not the end of the world. You should not take any rash steps after your application is denied. Several reasons may be attributed to a denied credit card application, such as-
- Below average credit score
- Incomplete or unsatisfactory documentation
- Loan defaults or delinquencies in the near future
- Too many recent enquiries on credit report
- Income does not meet the eligibility level
- No credit history
- Not meeting the age criteria
- Unstable job
- Occupation that does not match bank's criteria such as freelancing
- Applicant does not meet the internal approval algorithms of the bank
When your credit card application gets rejected, it is not a wise step to apply for another immediately. Here are a few things to do instead-
1- Find out the Reason
Most of the time, banks would be ready to tell you the reason why it was rejected. You should understand the reason and work on the same. For example, if you have a poor credit score, you should make regular payments for the next few months and try to reduce your credit utilization ratio. Once you have improved the score, you can apply again. In case incomplete documentation is the issue, make sure you have relevant supporting documents for the next application. Banks usually have certain basic eligibility criteria to be met before you can proceed to a detailed application. This includes income, residence and occupation. If you are ineligible in this screening, there is no point in applying for that particular credit card.
2- Review your Credit Report
Most of the answers related to your denied credit card application can be found in your credit report. Nowadays, it is quite easy to get your free credit report. Get the same and review the elements in it. If you find a wrong entry such as an extra credit card or a loan that you never took, it might be one of the reasons for rejection and you must get it corrected immediately. Moreover, rejected applications lead to a drop in your credit score which is the reason why it is suggested to wait for some time before sending the new application.
3- Find the Right Credit Card and the Right Bank
Before you apply for the next credit card, understand what you actually want in a credit card. Also, you should shortlist a few banks with which you have higher chances of approval. With your first credit card, it may be a good idea to get a credit card from the bank you already have a relationship with. Most of the banks would not be willing to offer credit cards to those who are new to credit. So, check for the same before applying.
A simple way to shortlist banks is to visit their website, select the card that you would like and check the eligibility for the same. Income requirement is the main thing to focus on. If you meet their income criteria, chances are that you may get approved for the card as well. Age is also an important criterion; you may be too young or too old to get a credit card so check the same before applying. Note that banks have set different eligibility criteria for different credit cards, so do an in-depth research before applying.
4- Apply Again with Caution
Once your application has been denied, you should tread with caution. Do not apply for credit cards just to see whether you would get approved as it would directly impact your credit profile. Too many credit card applications within a short span of time make banks think that you are a credit hungry person. Desperate applicants pose more risk to the bank and they might reject your application. It is best to wait for a few months, repair your credit and then send in a new application.
5- Go for a Secured Credit Card
If you have met with disappointment over credit card applications and nothing is helping, you can choose a secured credit card. As the name suggests, these cards are secured against fixed deposits and about 80 percent of your deposit value may be given as credit limit. Almost everyone gets approved for secured credit cards as the banks have least risk on them. If you default on credit card, the bank will use your deposit money to cover the loss. If you make regular payments on your secured credit card, the banks may invite you to upgrade to a better unsecured credit card based on your good financial behavior.
Remember that a credit card application may be rejected due to the bank's internal policies as well. So, if everything is fine with your credit profile, documentation and eligibility, you should switch to a different bank. Credit card denial is not a statement of your personal finance. As they say, when one door closes several other doors open for you. So, a rejection is, in fact, an opportunity for you to improve your credit health and understand your credit profile a lot better. Once you do this, you would find that there are so many more options in the market for you to consider. Searching for the right credit card and checking the important eligibility factors are the two most important things you can do to improve your chances of approval.