Factors Affecting Credit Card Eligibility
Credit cards can be a great financial instrument, if used wisely. They come with a variety of benefits like cashback, rewards, additional discount, complimentary lounge access, free memberships and much more. However, in order to avail a credit card, you must be eligible for it. You can check credit card eligibility online on the card issuer’s website or any of the third party platforms. Though the eligibility criteria for credit cards vary from issuer to issuer and from card to card, there are a few basic factors based on which the issuer decides your eligibility for a credit card. Some such factors are mentioned below:
Employment Status and Annual Income
Your employment status and annual income play an important role in deciding your credit card eligibility. A stable job can be favourable for you when it comes to credit card eligibility, whereas, switching multiple jobs frequently shows that you are not reliable and might hamper the chances of approval. Hence, working with your current organization for more than a year makes you look credible and can increase your chances of credit card approval.
Besides your employment status, your annual income also affects your credit card eligibility. Most credit cards have a minimum income requirement and if your income is lesser than the set minimum mark, it is likely that your card application will be rejected. Income also affects the credit limit that you would get on your card. As a proof of your income, you will have to submit bank statements or salary slips. In case you are self-employed, you need to prove that you earn steady profits or turnover to be eligible for a credit card.
Credit Utilization Ratio and Existing Debts
Credit Utilization Ratio (CUR) is another factor that issuers consider while evaluating your credit card application. It is the ratio of credit limit used by you to the total credit limit assigned. It is good to keep your CUR as low as possible because a higher CUR makes you look credit hungry, which can hamper your chances of credit card approval. In order to maintain a good CUR, you should never max out your credit cards and try to reduce the usage on each of your cards.
Credit card issuers also consider your existing debts while assessing your application. Any previous debts that you have not paid off can negatively impact your approval chances. Hence, it is important to pay off your previous debts on time to avoid any problems in the future. Also, if you have a lot of debt in the form of personal loans, credit card overdues, etc., a major portion of your monthly income would have to go towards EMI payments. This could present you as a risky borrower and lower your chances of approval.
Credit Card Payment History
Your payment history shows how well you are handling your finances. Therefore, while evaluating your credit card application, the issuers assess your payment history to check whether you can afford to pay the bill in the future or not. Any missing payments or defaults can decrease the chances of your approval. This is because late or missed payments show that you might miss out on payments in the future also, which is a huge risk factor for card issuers.
Good payment history includes timely payments and no debts, which can help you secure a credit card easily. You should always make your credit card payments on time and in full because even if you pay the Minimum Amount Due (MAD) and roll over the outstanding balance to the next statement cycle, it will incur high-interest charges. Overall, a positive payment history makes a positive credit score, leading to higher chances of approval.
Current Address or Location
Besides factors related to payment and credit score, credit card issuers also consider your current location when they assess your card application. Some card issuers offer credit cards only to people who are residing in select cities. Therefore, before applying for a credit card, it is important to check whether your card issuer offers credit cards to your location/city or not.
There are chances that your card issuer offers credit cards in your city but not at your pin code. In such cases, you can contact the card issuer to seek a solution. Hence, it is important to read about all the terms and conditions carefully before applying for a credit card.
New Credit Card Enquiries
Every time you apply for a credit card, your card issuer requests the credit bureau for your credit report, which is known as ‘hard enquiry’. The occasional hard enquiry does not affect your credit score, but multiple hard enquiries in a short span of time can harm your credit score, which can lessen your chances of card approval.
The card issuer checks your credit score to determine your creditworthiness. A lower credit score represents that you are not credit-worthy and cannot manage your finances well. Therefore, it is advisable not to apply for multiple credit cards at a time to improve your chances of credit card approval.
Apart from the above-mentioned factors, your age also affects your credit card eligibility. Most of the card issuers offer credit cards to people who are above 18 years. However, some issuers may offer it to people who are above 21 years of age. Therefore, you must check the age requirement before applying for a credit card.
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