Why was my credit card application declined?

Published: 01st April 2010
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Have you had to deal with the frustration of applying for a credit card only to find that the application was not successful? Contrary to popular belief, it is not only people with a "bad credit history" that could be declined (although this is one of the leading reasons). Below, we'll help you to understand why.

There are a number of reasons that lenders may decline your application for a credit card. We've outlined a few of the more common reasons below, and this information may help you to be more successful next time you apply.

1) You can't afford any more debt
When you apply for a credit card, the bank closely inspects your financial situation, taking into account your income, your existing debt and everyday living expenses among other things. Do you already have a credit card, store cards, loans or other types of debt?

The South African National Credit Act aims to protect people from over-extending themselves when it comes to credit. For those who already have debt, a credit card may become an unmanageable financial burden on top of all the other debt and everyday living expenses and thus the application may be declined.

2) You have a poor credit history
Your credit history is a detailed report of any debt you currently have, or have had in the past, and how efficiently you've settled it. It is a reflection of how responsibly you manage credit, and it is carefully examined when you apply for a credit card.

If you've ever missed payments, run into arrears or defaulted on instalments, it will be reflected on your credit history. The report also includes information about previous loan and credit card applications, your existing credit cards, any overdue accounts (defaults) and your present and past employers.

The information on your credit history reflects your creditworthiness. If you have failed to repay debt efficiently, you won't appear very creditworthy, and thus you may not qualify for a credit card.

3) You've already reached your maximum credit limit
Depending on your disposable income - which is the amount of income left after you've paid your living expenses each month - lenders determine a maximum credit limit for you. This is the maximum amount of credit you may have to your name, irrespective whether you have used all of it or not (it is also referred to as your maximum credit exposure). This is done to ensure you will be able to repay all your debt and in line with the National Credit Act.

When lenders are assessing your application, they look at your total credit exposure and use this - together with other criteria - to determine whether you can be granted more credit or not. So the more credit you have to your name - whether you use it or not - the bigger the risk that you have reached your maximum credit limit and will be declined for further credit.

4) Your job and/or living arrangements are unstable
When you apply for a credit card, you'll be obliged to provide information about your current employment and living arrangements. If you do not have a reliable stream of income (or you change jobs frequently), or if your living arrangements are uncertain, or you're still in the probationary period of your job, you may not qualify for a credit card.

If any of these scenarios apply to you, it's best to wait until you're on a more secure footing before submitting your application.

5) You filled out the application incorrectly
It may seem obvious, but many applications are rejected because they aren't filled in correctly. These days, given the ease of applying for a credit card online, it's easy to overlook a minor detail, or simply to click "send" without checking your information for errors.

Also, ensure that the information on your application matches the information that the bank may already have about you, and that your banking, personal and employment details are accurate. Be sure to submit all the supporting documentation that is required with your application, as many lenders will not continue with an application before receiving the supporting documentation. This is done to safeguard yourself as well as the lender against fraudulent applications.

6) You do not qualify for the specific credit card you applied for
Most credit cards have specific qualifying criteria such as income and age. Should you not be above the required age for the specific product or your income is lower than required, your application will probably not even be taken into consideration.

It is also wise to check the terms and conditions for the particular product, as some credit cards are also issued depending on the credit limit you qualify for.

Future credit card applications
If you have failed to qualify for a credit card this time, you could still qualify in the future. However, you must first rectify the issue that caused you to be unsuccessful, or wait until your income, employment or living arrangements are more certain.

About the Author:
Plastiq is a credit card comparison website that enables you to compare and apply for credit cards in South Africa, including Nedbank personal credit cards and other leading credit cards.

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