When You Apply For A Credit Card, A High CIBIL Score Isn’t Everything
When you apply for a credit card, it’s best to have a CIBIL credit score of 750 or above to get a new credit card. However, a good CIBIL score doesn’t guarantee approval, for lenders consider a host of factors besides a good score when they evaluate a credit card request.
Your credit card application’s status may read “denied” in any of the following scenarios (even when your credit score is impressive):
- Your CIBIL credit report has derogatory remarks on it
Two terms on your CIBIL report that makes you an outcast in the eyes of lenders are “written off” and “settled”. A “written off” status means the account is closed, even though debts is still owed; whereas, a “settled” account is one that was paid only in part.
The lender incurs a loss in both cases, though more so in case of a “written off” account. On a CIBIL report, however, both terms have the same permanent damaging effect: no lender will ever extend you a loan.
- Your debt to income ratio is high
Before approving a loan, one important factor banks consider is your debt to income ratio. It shows the percentage of your income that you are using to pay your EMIs. A high DTI means a big part of your monthly income goes into paying EMIs. It also indicates you may not be able to carry the burden of additional EMIs.
Banks prefer DTI to be less than 50%. If your DTI is over the acceptable mark, take steps to bring it down, and apply for a credit card only after that is achieved.
- You are a guarantor on a loan that has defaulted
For a bank, a guarantor is as good as the lender. If the lender has defaulted, the guarantor must clear the loan. Your loan application will be affected if you are a guarantor on a loan that has not been paid.
- You have taken too much credit in the last 12 months
Many banks may reject your credit card application if you had taken too much loan in the last 12 months. The policy on this varies from bank to bank. If you had taken quite a number of loans in the last year, consult with the bank’s representative before applying.
- Your taxpaying history is inadequate
If your taxpaying history is not yet 2 years old, the bank may reject your application. Some banks may be more lenient on this, so you can try a few other banks as well if your bank turns you down. If multiple banks turn you down, your only option will be to apply after you’ve filled returns for 2 years.
- You’ve been wrongly marked as a defaulter
When you apply for a credit card, banks usually have a list of defaulters, which contains their names and addresses. In case you move to a house whose previous occupant had been adjudged a bad credit risk, your name too will appear in red if the bank system automatically connects you with your new address.