If you’re applying for a new credit card, maybe even your first, you might have a lot of questions. One of the main ones could be: Can my credit card application be rejected? Will it hurt my credit rating? What can I do to be accepted?
Rejected credit card applications are not alarming. This can happen more often than you think, and there are definitely ways around this problem. But first, we’ll outline the five most common reasons why credit card applications may be declined or rejected and what you can do about it.
1. You have reached your credit limit
For those of you who may not know, a credit limit is basically a maximum spending capacity that your bank sets on your credit card. This can be found in your card contract and is usually on a monthly basis. For example, if your credit limit is S$10,000 per month, it means that if you spend more than that value, those purchases will be declined and your credit score may drop.
You might be wondering, why do banks care when technically I’m not in default on my loans and I’m repaying all the money on time? Think of it this way. Would you lend money to a friend who is known to owe another person S$10,000?
The best practice is to ensure that your spending does not exceed 30% of your credit limit for each card. Once you hit the 50% mark, you’re in the danger zone. Banks may consider you a flight risk, which will affect your credit score. This will in turn play a role in the rejection of your credit card application.
The solution: Before applying for a new credit card, take a few months to adjust your spending habits and build up a good credit rating. Stick to the 30% rule and you should be fine. After that, you can apply again and be sure that your application will be accepted.
2. Your loan balances are too high
If you recently took out a loan to make a big purchase like buying a new house (congratulations by the way!), your loan balance might be a bit too high for the card issuers to give you a new card. credit for now.
In a way, credit cards are like mini loans, you first make purchases with money from the bank before paying it back. Having existing debt can only make banks slightly hesitant to lend you more money. Same idea as before: would you lend money to a friend who doesn’t have enough to pay for his house and his car?
The solution: Slowly start paying off your existing loans before reapplying for a credit card. Consider paying off your loan sooner if you have the funds available, but the bottom line is this: pay off your debts on time and you’ll be well on your way to getting your next application accepted.
3. Your credit score is too low
One of the easiest ways to get your credit card application declined is to have bad credit.
A credit score is basically how a bank ranks its customers by how likely they are to repay their loans, with AA being a star customer who pays everything back on time and HH being you’re more likely to default than anything else. .
Every credit card has an appropriate credit score range, which means cards are generally only issued to those whose credit is within the limit. If you are notorious for not being able to repay the money on time, financial institutes will be reluctant to lend you even more.
The solution: There are many ways to boost your credit score, and quickly. Some even went from a DD to an AA in 6 months. There are plenty of ways to fix a bad credit score and you might be getting a new credit card before you know it.
Also read: Why your credit score is holding you back and how to fix it.
4. Your salary does not meet the requirements
Most credit cards on the market today come with a minimum income requirement. This is another type of insurance that credit card providers use to make sure you won’t default on your loans.
While you could still be an irresponsible card user with a high income and a reliable customer with a lower income, most providers would think a low income customer is more risk prone and may be hesitant to approve their card application. credit card.
The solution: Consider other options.
If you’re a recent college student or young adult, you may find it difficult to meet the requirements of most credit card companies. However, there are some credit cards designed for a younger clientele, which means the income requirement for these cards would be much more lax. For students, the Maybank eVibes credit card and CIMB AWSM credit card are two of the best deals on the market. The Maybank eVibes card offers the best flat-rate cash discount for students, while the CIMB AWSM card offered unlimited reimbursement on certain spending categories, making it ideal for super-savers. Both are great options for those looking to get their first credit cards soon.
Maybank eVibes credit card
CIMB credit card AWSM
Also read: Best student credit cards.
If you’re an avid traveler but want an entry-level credit card, look no further than the Krisflyer UOB Credit Card. For a Singapore Airlines fan, this card is one of the best on the market for earning KrisFlyer miles along with other great benefits. Another great option is the HSBC Revolution credit card for those who tend to spend more on shopping, dining, and entertainment.
KrisFlyer UOB credit card
HSBC Revolution Credit Card
Also read: The best credit cards for young adults.
5. You’ve recently applied for a lot of credit cards
Last but not least, another common reason why your credit card application could be rejected is if you have recently applied for other credit cards.
Basically, when you apply for a credit card, the bank will perform a credit score investigation to do their due diligence. However, each time a bank makes a credit score request, your credit score actually goes down. Imagine your boss’s boss randomly checking your performance. Even if you do a good job, your supervisor is sure to be suspicious.
The solution: The good news is that these drops in your credit score are really mild and your score can recover quickly. In due time, you will be able to apply for a credit card and succeed.
In the meantime, you can consider applying for a debit card that offers similar benefits like cashback and rebates. Our top picks would be the SAFRA DBS debit card and the UOB One card, for some of the best benefits.
SAFRA DBS debit card
SAFRA DBS debit card
Consider this if
you want excellent cashback on all your expenses
UOB One card
Also read: The best debit cards in Singapore.
Consequences of being rejected
Will being rejected now affect my chances of being successful with my future credit card application? This could be a major concern for you, but don’t worry, there is no major consequences of being rejected.
Due to your bank’s extensive credit score investigation, your credit score may drop slightly in the short term, but it’s sure to bounce back in no time. Just make sure you allow enough time between your applications for the credit score to grow organically.
All in all, there are many reasons why your credit card application could be declined. In this article, we’ve discussed the five most common reasons: reaching your credit limit, having low income, having high outstanding loans, having bad credit, or simply asking for too many credit cards. If you are unsure what the main problem could be, contact your bank and they will be more than willing to provide you with more details.
While you’re building your credit score and waiting for the next best application window, consider applying for debit cards such as the SAFRA DBS card which offers similar benefits to a credit card. If credit score is your biggest problem, you can and should take active steps to improve it. In the meantime, consider applying for credit cards with low credit limits or cards designed for young adults like the Maybank eVibes credit card.