Imagine a scenario where you have applied for a credit card, but it has been rejected. It is undoubtedly unfortunate, but you are not the only one facing this. Since financial institutions are strict about approving a credit card application. not meeting the eligibility criteria will lead to the same.
So, if you are planning to submit a credit card application. Knowing the consequences of a credit card rejection can help you prepare better.
What are the Consequences of a Credit Card Rejection?
When a credit card issuer rejects your application, the first thing that happens is that it hurts your credit score and credit history indirectly. This is so as every time you apply for a new credit card, a hard inquiry is raise, which reflects in your credit report. Owing to this, your credit score will also go down, lowering your prospects as a borrower. The next time you apply for a credit card, you will not be in a favorable position to get the best deals.
Ways to Avoid Credit Card Rejection
Here are some of the most effective practices. That might save you from credit card rejections and hampering your credit score.
- Wait for Some Time Before You Apply Again
Do not apply for a credit card right after rejection. Since you have been turn down recently, the following credit card company will not treat it favorably, and you will suffer another rejection. This is because more credit report inquiries make you appear eager for credit and lower your score. Hence, before applying again, you should wait a few months.
- Apply for Any Secured Credit Card
In case you do not have the ideal credit card for your requirements. You can consider opting for a secured credit card. While applying for such credit cards, you need to open an FD first. The FD amount becomes your credit limit. So if you open an FD of Rs.20,000, this will be your credit limit. Not only that, but you also earn an interest per annum on the FD you have opened.
Several credit card providers convert a secured credit card into an unsecure. One once you have made successful, timely payments for six to twelve months. You can check this financial institution’s digital credit card app to learn more about the same.
- Boost Your Credit Score if it is Low
As credit cards are unsecure credit facilities, financial institutions check your credit score before sanctioning the application. In case your credit score is below the eligible limit, the card provider might reject your application. During these situations, try increasing your credit score before applying again.
- Try to Include all Sources of Income
In case you have suffered a credit card rejection due to insufficient income, then try to rectify this point. To get a credit card, the issuer must ensure you earn enough to make timely repayments. Due to the same when you apply for a new credit card. Include all your sources of income like rent, freelancing work, and so on.
- Utilize Your Current Credit Cards in a Responsible Manner
The easiest way to ensure that your application for a new credit card is grant is to utilize your present cards sensibly. Pay credit card bills on time and try to keep the credit utilization ratio at 30%. Your chances of getting a new credit card increase once you demonstrate. That you can manage your existing credit cards responsibly.
Conclusion
Many variables can affect credit card approval, and refusal is often only a temporary delay rather than a final refusal. Therefore, the best way to prevent an application for a credit card from being reject is to know the reasons behind it. So, if you plan to apply for this financial tool, keep the points mentioned above in mind and plan accordingly.
