What should you do if your credit card application is rejected?

Your credit card application may be denied in a variety of circumstances but it’s not the end of the road. However, don’t be tempted to apply for another card immediately without understanding why your application was rejected.

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It’s understandable to feel disappointed if your credit card application is declined. While it might be tempting to reapply immediately, it’s often more helpful to first understand the reason for the rejection. You can then focus on increasing your chances of approval the next time you apply by improving upon these areas.

If your credit card application is declined, it’s often because you didn’t meet the eligibility criteria set by the bank or card issuer. In some cases, it could also be due to simple mistakes like typos or providing incomplete or incorrect information on the application form.

Here are some common reasons why your credit card application may have been rejected.

1. You do not meet the age criteria

You must be at least 18 years old to apply for a credit card. Therefore, your credit card application will be denied if you are underage.

Legally, credit providers are not allowed to practise age-based discrimination. However, applicants close to or in retirement might be perceived as a higher risk by some lenders. This is due to the likelihood of relying on limited superannuation payouts, stable yet fixed government pension funds, or income generated from investments.

If you've entered retirement, it's advisable to conduct thorough research before applying for a credit card, as the process involves additional considerations beyond your working years.

2. You do not possess residency status

The majority of credit card applications in Australia require you to be a permanent resident or a citizen of Australia. Therefore, if you are yet to get your residency status approved, you might not be able to get yourself a credit card. However, certain banks may issue credit cards for temporary residents, so make sure you find a suitable bank based on your residency status.

3. You filled out your application with the wrong information

Forms can be time-consuming and tiresome. It's all too easy to hurry through them in an attempt to complete them. You can make mistakes if you're not careful, and your application may be rejected as a result of these errors.

To proceed with your application, card providers must validate the information you submit. For example, the card issuer will have to reject an application if facts such as your home address or driver's licence number are wrong and cannot be validated. As you don’t want to get your application rejected for being careless, it's worth spending a little extra time reviewing all your information thoroughly before submitting it for processing.

4. You may not have sufficient annual income to qualify for a card

A minimum income criterion applies to most credit cards. Your application may be rejected if you don't meet these conditions. Most credit card providers have a minimum income threshold of around $30,000 to $40,000 annually. If you earn less, you may want to consider a low income credit card. These are usually available to those who earn between $15,000 and $20,000 a year. Premium credit cards with points and rewards programs are likely to have much higher annual income requirements than basic cards with minimal bells and whistles.

5. Your employment situation is not satisfactory

Just because you earn a six-figure salary doesn’t guarantee that you’ll automatically be approved for a new credit card. A credit provider must lend money responsibly. If they believe that you already have too much credit and aren’t in a good financial position to take on any more, they could reject your application.

While assessing your application, a credit provider will typically look at your income and spending to understand whether you can afford to take on additional debt. If your spending exceeds your income or your existing debts take up a significant portion, you may be perceived as a high-risk candidate and your application may be rejected.

6. You have a poor credit score

One of the most common reasons for a declined credit card application in Australia is a low credit score. Most credit card providers will only approve applicants who have a good credit score. When you apply for a credit card, the issuer will request a copy of your credit report from a credit-reporting agency. If your credit score is low, or you have negative information on your credit report, the issuer may reject your application. You can check your credit score for free to get an idea of how lenders may perceive your application.

If your credit card application is declined, reapplying immediately might not be the best idea. Even though a declined credit card application doesn’t affect your credit score, a hard enquiry is recorded on your file each time you make an application for credit.

When you make consecutive credit card applications after getting rejected, multiple credit enquiries will appear on your file in a short time span. This could hurt your credit score, and lenders are likely to get suspicious if they see multiple credit applications, particularly quickfire successive requests. Instead, consider finding out why your application was rejected and work on improving those areas before applying again. Contacting the credit provider for feedback can be helpful.

If your credit card application is declined more than once, you may also want to give some thought to whether a credit card is the right option for you at the moment - a debit card may be a viable alternative solution.

It’s possible that you’re servicing a high amount of debt or you’ve had financial issues in the past that put you at a higher risk of defaulting. Getting a new credit card to pay off existing debts or managing your day-to-day expenses could lead you into a debt trap if you’re not careful. Instead of taking on new credit to solve your financial problems, you may want to speak to a financial counsellor to work out a way to get on top of your deficit.

There are a number of strategies you can implement to help boost your prospects of a successful application:

• Ensure you have all the necessary documents needed for the application.
• Try to stay on top of any other loan repayments. Keeping up with regular payments can improve your credit score, potentially making you a more attractive customer when it comes to your credit card application. The less debt you have, the greater your ability to budget for new credit card repayments.
• If you’ve just started a new job, consider waiting until after you complete your probation period to apply for credit products - even if your new income is much higher than your previous gig.
• If you have been rejected by the bank, do not reapply immediately. If possible, wait for six to eight months before reapplying and see if you can find out why you were denied. If you can then fix that issue, it may increase your chances of approval.