Have you applied for a credit card and did the bank reject your application anytime? If yes, have you made an effort to understand why your credit card application rejected? If you haven’t, then you must try to find out why your credit card application was rejected and try to fix the problem and then apply for your credit card. Read on more to understand why your credit card application was rejected and how you can fix it and how you can choose the right card for yourself. By following the suggestions mentioned below you will be able to get your credit card application approved.
Find out why your credit card application was rejected
This is the first step you must take after you receive the rejection letter from the bank. Go through the letter that the bank has sent and see if any reason for the rejection was stated. If the reason hasn’t been stated, call up the bank and try to find out more details. Following are the reasons your credit card application could’ve been rejected:
- If there was insufficient information provided or if there was any document missing.
- If there was an issue with your credit report. Your credit report records late payments and settlements, etc. that drag down your credit score.
- If your debt to income ratio is high. If more than 30% of your income goes into paying your debts, the banks will not want to offer you any credit. A high debt to income ratio also hurts your credit score.
- If your income is not stable. If you have just joined a company or if you have been unemployed for a while, the banks don’t offer you a credit. It is good to wait at least until you have completed 6 months at your new work to apply for a credit card.
- If your income is low, the bank’s will reject your credit card application. The minimum income required to qualify is RM2,000 per month.
- If you have way too many credit cards, you will not get a new one. If your income is below RM36,000 and you have two credit cards already, you may have to cancel one card to get a new one.
- The other main reason could be that you have applied for too many credit cards at the same time. The banks will run a hard check and this will affect your credit score.
How can you clean up your credit report?
Cleaning up your credit report takes a longer time. The Central Credit Reference Information System will hold the information of your loan and credit information for the past one year. The report can be accessed by an individual or the financial institution in Malaysia.
The credit report consists information of your outstanding loan, special accounts, application of credit or loan, etc. It has a record of your payment behaviour. You can take a copy of your CCRIS report and do the following to fix your report:
- Pay all your bills on time for your existing loan and credit cards.
- Keep the balance on your credit cards below 30% of the credit limit.
- Don’t apply for a new credit until you have improved your credit report.
Your credit score will slowly improve in 6-12 months. You can check your CCRIS report again and if you are considering to apply for a credit card. If there is any mistake on your credit report, you must raise a dispute and get it rectified.
Why should you lower your debt to income ratio?
Most lenders consider the debt to income ratio to measure how much of your income goes towards paying the debt each month. The ratio is expressed in percentage. The lower the ratio, the better it is for you and a better chance of the credit card application getting approved. The debt to income ratio includes your credit card payments, car loan payments, home loan payments, etc.
When your debt increases, your credit score decreases and it becomes hard for your to get loans. You can do the following to reduce the debt to income ratio:
- Don’t swipe the card till you have made a considerable progress with your debt repayment.
- You can transfer your credit card balance to a one offering 0% balance transfer programme. You will be paying in instalments and you won’t be paying interest and it helps you clear out the principal amount faster.
- You must also relook your budget and trim your expenses wherever you can so you can have more money to pay off you your debt.
Apply for the right credit card
This is vital as you might be applying for credit cards that you don’t qualify for. You must shop around and check with the banks if they can offer you the card. You must then compare and choose the best option available. The minimum monthly salary requirement is RM2,000. Once you know that you can get the card and if you meet all the criteria, you must apply after ensuring that the rewards fit your lifestyle.
There are various cards that offers rewards for travel credit cards, petrol, shopping, groceries, etc. Check what you use your credit card most and then take a card that will fit your lifestyle. This way yu can earn rewards when spending on the card. Don’t go on applying for various cards as the banks will run a hard check on your credit report and that will reflect in your credit report. Spread out your application, wait for 3-6 months to make a new application. This reduces the negative impact it has on your credit score.
Don’t feel dejected after the rejection of your credit card application. It is a good thing as then you can check your credit report and rectify the mistakes and at the same time improve your credit score. Most of the times, the reason for rejection will have a simple fix. There are various websites that help you to compare credit cards as well. Make use of them and the online calculators to determine the best card for you.