Rejected for a personal loan or credit card? 5 reasons your application might fail

Your credit score rating is a report card of your credit score historical past and creditworthiness. Banks and NBFCs contemplate 750 and above a superb credit score rating for approving bank card and private mortgage functions. Nevertheless, a superb credit score rating is simply one of many elements thought of for approving credit score functions. Inspite of getting a superb credit score rating, in some instances, your credit score utility can nonetheless be rejected. What are these elements, and how are you going to fulfil these eligibility standards in order that your credit score utility will get authorised? Allow us to focus on.

Components thought of for approving credit score functions aside from credit score rating

A few of the the reason why your credit card or private mortgage could also be rejected even after having a superb credit score rating embody the next.

The financial institution doesn’t supply providers within the metropolis that you just stay in

Some banks and NBFCs function solely in specified cities. They could approve credit score merchandise just for residents residing in these cities. For instance, as per the HSBC web site, one of many eligibility standards for making use of for the HSBC Reside+ Credit score Card is the applicant’s metropolis of residence.

The applicant ought to reside in one of many following cities: Chennai, Gurgaon, Delhi Nationwide Capital Area (NCR), Pune, Noida, Hyderabad, Mumbai, Bangalore, Kochi, Coimbatore, Jaipur, Chandigarh, Ahmedabad or Kolkata. So, in case you stay in any metropolis aside from the above, your bank card utility will nonetheless be rejected inspite of getting a superb credit score rating.

Equally, the American Categorical web site specifies a listing of 19 cities as one of many eligibility standards for his or her bank cards. The resident should reside in one in all these 19 cities for the applying to be processed additional, topic to the fulfilment of all different eligibility standards.

The Customary Chartered Financial institution web site mentions: “Candidates ought to belong to bank card sourcing cities/places of the Financial institution” as one of many eligibility standards.

To sum up, you could reside within the metropolis from the place the financial institution or NBFC is sourcing credit score functions on your utility to be accepted and processed additional.

You don’t meet the revenue or age eligibility standards

Banks and NBFCs specify the revenue eligibility criteria for credit score functions. The revenue is specified for salaried and self-employed people. Within the case of bank cards, revenue eligibility varies from card to card for a similar financial institution. For instance, HDFC Financial institution specifies a web month-to-month revenue of greater than Rs. 12,000 for the Freedom Credit score Card, which is an entry-level bank card. For self-employed people, the Earnings Tax Return (ITR) should be greater than Rs. 6 lakhs each year.

Equally, for the Diners Black Membership Credit score Card, a premium bank card, the web month-to-month revenue ought to be greater than Rs. 2.5 lakhs for salaried people. For self-employed people, the ITR should be greater than Rs. 30 lakhs each year.

Just like revenue eligibility standards, banks and NBFCs specify the minimal and most age standards for credit score functions. In case you don’t fall within the specified age standards, your credit score utility can be rejected inspite of getting a superb credit score rating.

For instance, the HDFC Financial institution web site specifies that a person ought to be between 21 and 60 years of age as one of many eligibility standards for a private mortgage. Equally, different banks and NBFCs specify their very own age standards for private loans and bank card candidates.

So, even with a superb credit score rating, it’s important to have a gradual revenue supply, a secure job, and fulfilling different private mortgage standards.

You modify jobs too continuously

In case you change jobs too continuously, the financial institution will contemplate it as you might be unstable in your profession. Banks want that their private mortgage debtors have a secure profession. Profession stability ensures an influx of standard month-to-month revenue that can be utilized to service the personal loan EMI and different obligations.

For instance, the HDFC Financial institution web site mentions the next about a person’s job as one of many private mortgage eligibility standards. The person ought to have a job for at the very least two years, out of which a minimal of 1 12 months should be with the present employer.

So, even if in case you have a superb credit score rating, you will need to have a gradual revenue supply with a secure job together with fulfilling different private mortgage standards.

Your DTI ratio is excessive

The debt to revenue (DTI) ratio measures the share of revenue used to service debt obligations (mortgage EMIs and bank card excellent). Often, banks contemplate a DTI ratio of 35% or decrease nearly as good for approving private mortgage functions, offered different eligibility standards are fulfilled. Some banks might contemplate and approve private mortgage functions with a DTI ratio within the 36% to 50% vary, with extra safeguards in place. With a DTI ratio above 50%, the probabilities of private mortgage utility go down considerably.

Earlier than making use of for a private mortgage, you could test your DTI ratio. Whether it is increased, you could work on bringing it down earlier than continuing along with your private mortgage utility.

There is a matter along with your KYC paperwork, KYC course of, or revenue paperwork

If you apply for a bank card or private mortgage, together with the applying type, you could submit the Know Your Buyer (KYC) paperwork. These embody a replica of your {photograph}, identification and deal with proof. If any KYC paperwork are lacking or have any points, the credit score utility can be rejected.

The financial institution might do a bodily verification of your residential and workplace deal with. If there are any points within the verification, the credit score utility can be rejected.

Together with the KYC paperwork, you could submit the revenue paperwork. These might embody your wage slips / ITR, financial institution assertion, and so on. Often, banks ask for the final three months’ wage slips or the ITR of the final monetary 12 months. Often, the financial institution assertion required is for the final six months. If these paperwork should not submitted as required or there’s any challenge with them, the financial institution will get in contact for corrective motion. If the suitable paperwork should not submitted inside a specified timeframe, the credit score utility can be rejected.

You will have utilized for too many bank cards or loans on the similar time

In case you make too many credit score functions in a brief time period, the financial institution will contemplate it as credit-hungry behaviour. The financial institution accesses your credit score profile for each credit score utility, leading to a tough inquiry that lowers the credit score. Too many credit score functions in a short while can decrease the credit score rating considerably.

In such instances, the financial institution might view the applying as dangerous and reject it. It’s essential to apply for a private mortgage or bank card with one financial institution at a time and await the financial institution to provide its choice. If the applying is rejected, you could proceed with the subsequent utility. It’s essential to guarantee there’s a ample time hole between two credit score functions.

How you can improve your probabilities of a private mortgage or a bank card utility approval

On this article, now we have understood the assorted different elements, aside from credit score rating, thought of by a financial institution or NBFC for approving credit score functions. So, having a superb credit score rating whereas making use of for a private mortgage or bank card is important. Nevertheless, that isn’t the one standards.

Earlier than making use of for a bank card or private mortgage, you must consider the assorted different eligibility standards. In case you don’t, and if there’s any challenge, your credit score utility can be rejected, leading to monetary hardship and disappointment. However, in case you take note of these eligibility standards and fulfil them, your probabilities of a bank card or private mortgage utility will improve considerably.

Gopal Gidwani is a contract private finance content material author with 15+ years of expertise. He might be reached at LinkedIn.