Rejected credit card? Here’s what to do next: A step-by-step guide

Credit cards are one of the most preferred financial tools as they help customers make purchases without the need to pay back immediately, along with added rewards and offers. Due to its attractive offers, many people apply for one. Applying for a credit card is very easy, however, issuers look for many criteria before approving a credit card application therefore many applications get rejected.

Reasons for rejection of credit card application

1. Poor credit score
2. Error in the credit report
3. High debt-to-income ratio
4. Issuer’s eligibility criteria
5. Multiple loans

Steps to take if your credit card application is rejected

1. Improve credit score: If your credit card application is rejected due to a poor credit score, take steps to improve it. Pay all your pending dues, as all outstanding debt is reflected on your credit score. Clearing all your dues will boost your credit score. Additionally, pay your existing EMIs on time and have a lower credit utilization ratio to improve the score. A lower credit utilisation ratio shows your ability to pay the capacity to bear your expenses with your existing income rather than relying on credit.
2. Verify credit report: A credit report is a statement that shows your credit history, including payments, account details, personal information, etc. This report is essential to getting a credit card, as issuers mostly rely on it to check your credit history. An error in the credit report may reflect a poor credit score, credit history etc, which might lead to the rejection of the application. Make sure to verify all the entries on the credit report, check for errors and report them.

• Low debt-to-income ratio: This ratio shows the portion of your income that goes on debt payments. Having a lower debt-to-income ratio reflects on your creditworthiness and the ability to handle unexpected expenses. It increases your chances for acceptance of loan and credit card applications. You can lower this ratio by paying off high-interest-rate debts, consolidating debt, avoiding taking new loans and looking for additional sources of income.
• Issuer’s criteria: Every bank or NBFC will have different criteria for approving credit card issuance. Before applying for a credit card, review the eligibility criteria for various issuers and apply for the one that matches your finances and needs.

• Correct time: If your application gets rejected, make sure to apply for a new card after some time. Take this time to improve your credit score, verify your credit report, and try to lower your debt-to-income ratio to increase your chances of getting approved for credit card use. Applying too soon will reflect negatively on your credit score. Reapplying too soon may lead to hard inquiries on your credit report, negatively impacting your credit score.

In conclusion, rejection of a credit card is a reflection of your financial health and your ability to manage your debt. If your application is rejected, you must take measures to improve the key parameters required for approval of a credit card. This will help to manage your finances well and improve your chances of getting a credit card or other form of debt easily in the future.

(Note: Using a credit card carries its own set of risks)