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Despite having a good credit score, in some cases, your credit application can still be rejected.
Banks and NBFCs specify the income eligibility criteria for credit applications.
Your credit score is a report card of your credit history and creditworthiness. Banks and NBFCs consider 750 and above a good credit score for approving credit card and personal loan applications. A good credit score is just one of the factors considered for approving credit applications. Despite having a good credit score, in some cases, your credit application can still be rejected. What are these factors, and how can you fulfil these eligibility criteria so that your credit application gets approved? Let us discuss.
Some of the reasons why your credit card or personal loan may be rejected even after having a good credit score include the following:
Bank Doesn’t Offer Services In The City
Some banks and NBFCs operate only in specified cities. They may approve credit products only for citizens residing in those cities. For example, as per the HSBC website, one of the eligibility criteria for applying for the HSBC Live+ Credit Card is the applicant’s city of residence.
The applicant should reside in one of the following cities: Chennai, Gurgaon, Delhi National Capital Region (NCR), Pune, Noida, Hyderabad, Mumbai, Bangalore, Kochi, Coimbatore, Jaipur, Chandigarh, Ahmedabad or Kolkata. So, if you live in any city apart from the above, your credit card application will still be rejected despite having a good credit score.
Unable To Meet Income Or Age Eligibility
Banks and NBFCs specify the income eligibility criteria for credit applications. The income is specified for salaried and self-employed individuals. In the case of credit cards, income eligibility varies from card to card for the same bank. For example, HDFC Bank specifies a net monthly income of more than Rs 12,000 for the Freedom Credit Card, which is an entry-level credit card. For self-employed individuals, the Income Tax Return (ITR) must be more than Rs 6 lakhs per annum.
Change Jobs Frequently
If you change jobs too frequently, the bank will consider it as you are unstable in your career. Banks prefer that their loan borrowers have a stable career. Career stability ensures an inflow of regular monthly income that can be used to service the personal loan EMI and other obligations.
High DTI Ratio
The debt to income (DTI) ratio measures the percentage of income used to service debt obligations (loan EMIs and credit card outstanding). Usually, banks consider a DTI ratio of 35 per cent or lower as good for approving personal loan applications, provided other eligibility criteria are fulfilled. Some banks may consider and approve personal loan applications with a DTI ratio in the 36 to 50 per cent range, with additional safeguards in place. With a DTI ratio above 50 per cent, the chances of personal loan application go down significantly.
KYC Document Issues
When you apply for a credit card or personal loan, along with the application form, you must submit the Know Your Customer (KYC) documents. These include a copy of your photograph, identity, and address proof. If any KYC documents are missing or have any issues, the credit application will be rejected.
Applied Too Many
If you make too many credit applications in a short period, the bank will consider it as credit-hungry behaviour. The bank accesses your credit profile for every credit application, resulting in a hard inquiry that lowers the credit score. Too many credit applications in a short time can lower the credit score significantly.
