Rejection hurts. It is never easy, even when it is something as emotion-less as a credit card application. But it happens, and you will no doubt feel bummed about it.
If your application was rejected, don’t give up! Find out why you were rejected, fix the problem and, eventually, you WILL get the plastic you desire.
Here are three steps to getting your next credit card application approved!
Step 1: Find out why
Receiving a rejection letter from the bank when you are expecting the credit card that you applied for can be crushing.
But before you burn the letter, try and find out what the reason for the rejection was first. Go through the letter to see if a reason is stated. The thing with bank applications are you may not be told the reason why you are rejected.
You can call the bank to find out more details on the reason you were turned down. Usually, banks won’t tell you up front so you’ll need to call them to find out.
Here are some common reasons that can result in you being denied a credit card:
| Insufficient information or missing required documents In most cases, you are required to submit the latest EPF statement and your NRIC with your application. Sometimes, more supporting documents were needed and your application could be rejected if you don’t get those to them in time. Call to find out. |
| There’s an issue with your credit report Frequent late payments for your other cards or loans will drag your credit score down. Check your iMoney CreditScore to find out if you have any signs of being a poor paymaster. |
| High debt-to-income ratio Your debt-to-income ratio measures how much you spend on debt payments per month, against your monthly income. The recommended healthy ratio is below 30%. Anything higher will hurt your credit. |
| Your income is not stable Banks always want to see a stable, predictable source of income from their customers. If you’ve just joined the workforce, or have been unemployed for a while, it’s good to wait for at least 6 months at your new job so you can show them this consistency before applying for a card. |
| Your income is too low Ensure that you are applying for cards that you can meet the minimum income requirement. TO be able to qualify for a card, your income must be at least RM2,000 a month. |
| You own too many credit cards If you are earning below RM36,000, you will not be able to own credit cards from more than two issuers. You can cancel on card first, then apply for another. |
| You applied for too many credit cards in a short period of time You may think you are bound to get one card approved when you applied for a dozen, but this can make you seem less creditworthy. If you are rejected, wait for a few months before applying again. Remember, if your application is rejected from one bank, another bank looking at your credit report will see that and will also be less likely to approve you. |
By knowing the usual factors banks look at when approving credit card application, you may be able to rectify it for your next application!
2. Clean up your credit report
Of all the reasons for being denied your credit card application, a problematic credit report is the most important and difficult to rectify. It will also take a longer time to rectify.
In Malaysia, your credit report is stored in the Central Credit Reference Information System (CCRIS). The CCRIS is managed by the Credit Bureau under the central bank. It records all your loans and credit information of the past 12 months. This report is made available to the individual, and also all the financial institutions in the country.
In the report, you will be able to see your outstanding credit (such as home loan, hire purchase, credit card, personal loan and overdraft), special attention accounts (such as Non-Performing Loan, or under special debt management programme, like those by AKPK), and applications of credit or loan.
Under each section, information such as outstanding amount and payment behaviour are included, so financial institutions will be able to gauge if you are a good paymaster, and also determine your debt-service-ratio (DSR), which will be explained in the next point.
These steps include:
If you are disciplined in keeping all of the above three steps for six to 12 months, your credit score will likely improve. If you keep regular tabs on your credit score, you can easily know when you are ready to reapply for the card you couldn’t get before.
On the off chance that there is a mistake on your credit report, you can dispute it and have it corrected.
3. Lower your debt-to-income ratio
Many lenders use debt-to-income, also known as, debt-service ratio (DSR) to measure how much of your income is spent on debt payments every month. They use this as a gauge of your ability to service future debt should they issue a card to you. This ratio is expressed as a percentage, and the lower the percentage is, the better.
For example, Amy earns RM4,500 a month, and she has a combined debt payment of RM2,000 every month, which includes a credit card, a car loan and a personal loan. Her DSR is RM2,000 divided by RM4,500, which comes up to 44%.
That’s less than ideal, and any new credit application by Amy, including a credit card, may be rejected due to the high DSR.
Taking on too many debts relative to your income can have serious consequences. With your debt increasing, your credit score will slide downward, and that makes it harder to get other loans.
If DSR is the reason why you are denied a new card application, here are a few steps you can take to rectify that:
- Stop swiping a card and make real progress with your debt repayment.
- Transfer your existing credit card debt through a balance transfer facility. With a 0% interest balance transfer programme, more cash will go toward the principle, so you’ll be debt-free faster.
- Relook at your budget and cut and trim where necessary so you can funnel more money towards your debt.
4. Apply for the right card
Another common reason for having your credit card application rejected is the applicant not fulfilling the credit card requirements. Therefore, it is important to check and understand the requirements of the card you are applying for before submitting your application.
The lowest minimum income requirement for a credit card Malaysia is RM2,000 a month, or RM24,000 per annum. To protect the cardholders and help them avoid getting in a huge debt, Bank Negara Malaysia has come up with a new regulation where those earning RM36,000 per annum and below can only hold credit cards from a maximum of two issuers and the maximum credit limit extended to a card holder should not exceed two times their monthly income, per issuer.
If you fit into this category, it makes even more sense to ensure the two credit cards you put in your wallet will help you save and spend wisely. This means getting cards that fit your lifestyle! There are various cards in the market, such as petrol, travel, groceries and shopping, and even dining. By getting a card that fits your lifestyle, you can be rewarded for your spending.
By knowing these general credit card guidelines in the country, check the requirements and don’t apply for cards that you are unable to meet the stipulated requirements. Your credit score can take a hit with a rejected credit application, it’s better not to “try your luck” with applications that you know you may not be able to get approved as that’ll have a negative impact on your credit score in the future.
Sometimes the problem that led to your initial rejection was simple to fix. Don’t fall into despair when you get a rejection letter, instead find out what is wrong. It could be as simple as an error in your application form.
Although it is a simple error, always spread out your application by waiting for at least three to six months before your next application. Every time you apply, that’s an inquiry on your credit, and you want to make sure you spread those out over time.
