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What are some of the reasons why a credit card application is declined?
Applying for a credit card is usually a straightforward process, but getting the approval of the car issuer is another matter. There are several eligibility criteria and other factors that guide the process.
If your credit card application has ever been rejected, or you want to ensure that it doesn’t, you may want to know the reasons why credit card applications are rejected.
Disclaimer
This article is over two years old, last updated on October 18, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent credit cards articles.
What are some of the reasons why a credit card application is declined?
- Incorrect information
Entering all your necessary details in a multi-page application can be daunting. This may cause you to make some mistakes, especially if you’re trying to rush through it. But you should be careful because any errors could cause your application to be rejected. Card issuers need to verify all the details in your application to be able to offer you any form of credit. So if they cannot do so, they’re left with no option but to reject the application.
- Minimum Income requirements
A bank or credit card issuer often offers multiple credit cards with varying spending limits. The lower the spending limit the more likely you’ll get your credit card application approved, plus these cards often have lower fees and charges. However, if you’re applying for a premium card with a higher limit, you’ll also have to meet the minimum income requirement. This may vary from $35,000- $75,000, depending on the type of card you’re applying for and the card issuer. If you’re unable to meet this requirement, it’s likely to be the reason why your credit card application was declined.
- Credit Score
Your credit score allows the bank or card issuer to gauge how responsible you are with your finances. Naturally, they’ll be inclined to decline your credit card application if you have a bad credit history. However, if you have a good credit score, your application has a much better chance of being approved. Make sure to check your credit score before applying as having a rejected application on your credit file will negatively impact your score.
- Employment
It’s easier to get a credit card application approved if your employment status is full-time - and you have been working for longer than your probation period (ideally 12 months), as this showcases a high level of financial stability. Part-time, casual, seasonal, and freelancing often have an irregular flow of income, making banks and other financial institutions sceptical about approving credit. While this doesn’t automatically disqualify you from credit approval, you may have issues if you have an income source that is hard to verify. Having any unstable or unverifiable income will likely cause your credit card application to be declined.
- 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.
- Other associated risks
The bank or card issuer wants to ensure you can repay any money you spend on your card. So you’ll have to provide them with details about your expenses and income. This will include details about your insurance premiums, bills, mortgage repayments, and other loans. To have your application approved, it’s likely that your income needs to be significantly higher than the expenses. Your credit card application could be rejected if your expenses already outweigh your income.
What happens if you get rejected for a credit card?
When your credit card application gets rejected, this may be noted on your credit report, which could potentially lower your credit score, and impact any other credit applications.
During the application process, the bank or card issuer will run a credit check, which includes a hard enquiry on your credit file. All hard enquiries are then listed on your credit file. This may not impact your credit score, but having multiple enquiries from multiple applications can, as this may make you appear as credit hungry, and less likely to service the credit card responsibly.
Make sure to only apply for credit you genuinely need (ideally one product at a time) to avoid having too many hard inquiries on your credit file.
- Ensure you have all the necessary documents needed for the application.
- Try to stay on top of your other loan repayments. Keeping up with regular payments can improve your credit score, making you a more attractive customer when it comes to your credit card application. The less debt you already 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 leave the probation period to apply for credit products - even if your new income is much higher.
- If you have been rejected by the bank, do not reapply immediately. Wait for 6 to 8 months before reapplying and see if you can find out why you were denied. If you can then fix that, it may increase your chances of approval.
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