Rejection is a painful experience most of us have gone through sometime in our lives. Take for instance courting the girl you like. She made you follow and drool over her like a dog, only to ditch you without telling why.
The exact same feeling hits you when you applied for a credit card. After submitting the necessary requirements, and a few follow ups, the bank rejects your application. This isn’t high school happening all over again.
Let me tell you that banks are very secretive, they won’t bother telling you why. As I have been rejected a couple of times for credit card application, I’ve figured a few reasons why and what you can do about it:
1. Your Salary Is Too Low
In the Philippines, having a credit card is a status symbol. Nothing can make you feel more sosyal than by swiping that plastic card when shopping at your favorite stores like Bench or Mercury Drug.
But if your income isn’t enough to get you the fanciest item in bench, or the most expensive pill at Mercury Drug, chances are your credit card application will get rejected.
You see, one reason why you could be denied is if you don’t make enough money. Banks are run by businessmen who knows a lot about money and how it works. So if they see that you probably wont give them good business, they won’t sort of invest on you.
Solution: Paying your existing bills in full each month may help your credit score look good. You can also start opening a savings account since most banks issue pre-approved credit cards to their existing clients.
2. You Recently Applied For Multiple Cards
Once you realize that credit cards can actually save you hundreds of peso a year, it’s only natural to go a little crazy and start applying for stacks of cards—one for grocery shopping, another for gas discounts, another for online shopping, another to dig the dirt out from your pores and so on.
Each time you apply for a credit card or a loan, the banks will do their rounds of credit, financial and personal background check to see if you’re trustworthy enough to get debt money from them. And since we’ve gone so hightech these days, expect them to sneak in your facebook profile as well.
The problem is, every time an enquiry is made, your credit score takes a little hit. It doesn’t seem fair since you haven’t incurred any actual debt, but banks get suspicious anyway, just like parents get suspicious if their kids’ school principal calls them up just to say hi.
On the bright side, these blows to your credit score are relatively light and should eventually go away.
Solution: If you’ve recently applied for several credit cards or any kind of loan, wait a couple of months and then try applying again.
3. You’re Using Too Much Of Your Available Credit
Even if you’re not technically defaulting on your loans, if you use too much of your available credit each month, banks will be reluctant to lend you more. Would you lend money to a friend who already owed five other friends Php5,000 each and seemed to be addicted to shopping? My point exactly.
If you have ten credit cards but only use one of them, on which you have reached 50% of your credit limit, your credit score will suffer regardless of the fact that your other nine credit cards are collecting dust in your wallet. In such a scenario it would be wiser to spread out your expenditure over several cards.
The amount of credit you’ve used in total as a fraction of the sum of all the credit facilities extended to you also matters.
In short, letting your debt balloon from month to month is going to hurt your chances of getting another credit card application approved.
Solution: Pay down as much debt as you can, ideally to the point where all your cards have a balance of 0. Wait some time for your credit score to improve and then apply again.