Expert Tips on How to Deal with Declined Credit Card Application

Are you one of those individuals who applied for a credit card but got declined?

Applying for credit cards can be a convenient way to purchase your dream house and lot in the Philippines. Also, it is the most effective way to build your credit history as well. However, getting approved for one isn't always easy, especially if you have a less-than-perfect credit score or a high debt-to-income ratio. 

If you have recently applied for a credit card in the Philippines and were denied, don't worry; you're not alone. Here are some reasons why your credit card application has been declined and what you can do about it.

Top Reasons Why Your Credit Card Application is Declined

Credit cards can be helpful if you’re using them correctly. It can help you purchase your dream car, clothing, gadgets and appliances, and most of all, an affordable house and lot for sale. Thus, it gives you purchasing power. That is why it is quite difficult to get credit card approval.

So, why does your credit card application denied? Does applying for a credit card hurt a credit standing? Here’re the common reasons why.

Poor Credit Score

Your credit score is the most vital factor lenders consider when reviewing your application. It's a numerical representation of your credit history and ranges from 300 to 850. The higher your credit score is, you'll have the better chance of getting approved. But if your credit score is low, it can indicate to lenders that you're a high-risk borrower who is more likely to default on your payments.

Insufficient Income

Credit card companies want to ensure you have the means to repay the money you borrow. If you don't have a steady or low income, it can be a red flag to lenders. In general, you'll need to have a minimum income of PHP 120,000 per year to qualify for most credit cards in the Philippines.

Debt-to-Income Ratio is High

A debt-to-income ratio is the amount of debt you owe compared to your income. If your debt-to-income ratio is high, this can indicate to lenders that you may struggle to make your payments on time. Ideally, your debt-to-income ratio should be below 36 percent, but some lenders may have stricter requirements for credit utilization ratio.

Errors on Your Credit Reports

Your credit report bears information about your credit history, including your credit accounts, payment history, and outstanding balances. If you have credit report errors, it can negatively impact your credit score and chances of getting approved for a credit card. But, this also rarely happens, given that technology is being utilized to gather information.

No or Lack of Credit History

If you're new to credit or have a limited credit history, getting approved for a credit card can take time and effort. Credit card issuers want to see your track record of using credit responsibly and making payments on time. Without a credit history, lenders have no way to evaluate your creditworthiness.

5 Things to Do When Your Credit Card Application is Denied

Fortunately, you still have a high chance of getting approved once you follow these expert tips below to avoid credit card denial in the future.

Check Your Credit Report

If you were declined a credit card due to errors on your credit report, you could dispute them with the credit bureau. You can request a copy of the credit report from any of these major credit bureaus in the Philippines: CIBI Information Inc., Credit Information Corporation, and TransUnion. Thanks to Fair Credit Reporting Act, you can request a copy of why your credit applications are being rejected.

Improve Your Credit Score

If you have no, low, or bad credit score, you can take a few steps to improve it. This may include paying down debts or existing credit accounts, making timely payments, and disputing any errors on your credit report. It can take time to improve your credit score, but it's worth it in the long run.

Lower Your Debt-to-Income Ratio

If your debt-to-income ratio is quite high, you need to pay down debt or increase your income to improve your chances of getting approved for a credit card. Consider taking on a part-time job or side hustles to boost your income, or work on paying down your debt by creating a budget and sticking to it.

Apply for a Secured Credit Card

If you're new to credit or have a limited credit history, consider applying for secured credit cards. With secured credit cards, you'll need to make a security deposit upfront, which acts as collateral for your credit limit. Although credit card providers only approve low credit limits, this can help you build a credit history.

3 Things to Consider When Applying for a Credit Card

Credit cards can be useful tools for managing your finances, providing you with the ability to make big purchases and pay for them over time. However, there are a number of considerations that you must keep in mind to ensure that you choose the right card for your needs.

Assess your financial situation.

Do you really need a credit card to cover your expenses and leisure? Note that having a credit card is added monthly expense since you’ll be paying them every month. So, ensure you can afford to pay off any balance you may carry on the card and that you're not taking on more credit card debt than you can handle.

Too many credit cards application is also a red flag for credit card companies because it indicates you are struggling financially.

Check for fees and interest rates.

Some cards charge annual fees, balance transfer fees, cash advance fees, or foreign transaction fees. Plus, there is also an amount of interest that you will be charged on any balance that you carry on the card. Higher interest rates mean that you'll pay more interest charges. So, make sure you understand all the credit card fees and interest rates associated with the card before applying.

Look for rewards programs.

Many cards offer rewards like cashback, points, or miles. Determine which spending activities you would like to use your credit card. Then, choose a rewards program that fits your spending habits to maximize your rewards. 

Regardless if you have a credit card or not, Lumina Homes can help you achieve your dream investment. Our housing packages accept in-house and bank financing and PAG-IBIG housing loans. As long as you have proof of regular income and good credit standing, you can avail of our affordable house and lot properties in your preferred location. 

What’s more, owning a home property also helps you build good credit to qualify for a credit card application. Message us now for more details and inquiries.