What to Do If Your Credit Card Application Is Rejected

While getting declined for a credit card can be a bummer, it happens to the best of us and shouldn’t be the cause of anxiety and paranoia. You can always try again, this time with the knowledge of why your bank declined and a solution for increasing your credibility as a borrower.

From a bad credit score of unpaid debt, there are many reasons why credit card applications get rejected. Most of these reasons are resolvable, so you don’t have to shy away from submitting another application. If you recently got denied for a credit card, here’s what you should do next to boost your chances of getting approved the next time around:

Assess the Reasons for Getting Declined

Once you receive the notification from your bank stating the reasons for denial, you may be tempted to just shrug it off and give up on securing a card altogether. Having a clear understanding of why your application was denied will help you avoid future mistakes if you decide to reapply. Typically, applicants can get their applications denied due to:

• High debt-to-credit or credit utilization ratio. Ideally, you need to keep your utilization ratio below 30 percent.
• Low credit scores.
• Young age. To get a credit card Philippines-based banks duly recognize, you need to be at least 21 years old and below the age of 70.
• Little to no credit history. To assess your capacity to pay responsibly, banks need to evaluate your previous credit card and loan payments. As such, lacking a record may leave room for doubt about your repayment ability.
• History of unstable employment. Remember, you need to have a stable source of income to sustain a credit card.
• Negative payment history. This includes late or missed bill payments and unpaid balances on existing credit cards.
• Inaccurate or incomplete information on your application form.
• Low income.
• Excessive credit card applications.

Once you pinpoint the reason (or reasons) why you got denied, you can start taking transformative actions such as repaying existing debt, getting additional sources of income, or simply waiting it out until you are at the right age or have stayed long enough at your job.

Reevaluate Your Choice of Credit Card

Your income also plays a big role in determining your eligibility for a credit card. Most banks in the Philippines have a wide range of credit card offerings, with some products having a lower annual income requirement. These credit cards are accessible to applicants with an annual income of at least PHP 180,000. To boost your chances of getting approved, consider applying for a credit card with an income requirement that’s more within your range.

Aside from the minimum income required, it may help to consider other factors such as annual fees, interest rates, and features such as rewards, cashback, and insurance. Knowing your preferred features usually helps you determine the most sustainable credit card for your financial capacity.

Consider Your Alternatives

While credit cards are undoubtedly beneficial, they don’t have to be your end-all-be-all. You can still apply for cards that function similarly to credit cards but have less stringent requirements. One such option is a prepaid card, which mostly functions just like a credit card, but limits your spending depending on the amount that’s currently on it. Another option is getting a secured credit card, which acts like a credit card except you need to first deposit a certain amount to serve as collateral. Normally, the credit limit for secured credit cards is 80 to 90 percent of the amount deposited.

Lastly, you have the option of becoming a supplementary cardholder for a spouse or other family member who holds a credit card. Unlike principal cardholders, supplementary cardholders don’t need to submit financial documents such as proof of income to enjoy the card’s benefits. That said, the primary cardholder still controls how much authorized users are allowed to spend.

Revisit Your Credit Report

Some applicants are unaware of their credit score before applying, which often leads to the denial of their applications. To replenish your credit score, take the time to assess your credit report to determine potential errors and areas for improvement. In the Philippines, you can get your credit report from the Credit Information Corporation, a government-owned and operated organization that banks and financial institutions look to for credit checks and cross-references.

Once you get your credit report, keep an eye out for errors that might have caused the bank to deny your application. You can file a dispute regarding inaccurate information and have this data corrected to clean up your record. Once this has been addressed, you can request your bank to reconsider your application, especially if the bad record was the sole reason for its rejection.

However, if the report shows a truthful record of high credit card balances and overdue loans, you need to make some changes in your financial habits to transform this into a good credit score. The best way to do this is by repaying your debts and minimizing your credit card and loan applications.

Wait a Few Months Before Reapplying

Once you have taken corrective action to improve your credit score, you may feel tempted to reapply as soon as possible in the hopes of getting your desired result this time around. However, doing so may not be a good idea. Generally, financial experts agree that you need to wait at least three months before submitting another application.

While getting denied a credit card is not necessarily harmful to your credit score, reapplying way too many times can lead to frequent inquiries on your credit report and raise red flags for credit issuers. Moreover, sending applications one after another gives you a bad reputation, as it signals an alarming urgency for funds.

A failed credit card application doesn’t mean that you’ll never be eligible for it. There are many things that you can work on to ensure that you pass on your next try. Once you’ve gained your creditor’s trust, make every effort to maintain your good credit standing. This means staying up to date on your recurring payments, being mindful of your finances, and practicing responsible spending. In the end, it’s best to abide by good financial practices until they come naturally to you, not just because you want to get approved for a credit card. These practices are crucial in helping you attain greater financial freedom,  which would eventually make everyday spending a lot less burdensome.