Several factors are included in determining your eligibility for a Credit Card. While many factors may vary slightly depending on the card issuer and the country you reside, there are some common factors followed, such as:
Credit score
Your credit score is a primary factor influencing your Credit Card eligibility. Banks will check your credit history and determine your eligibility. Your credit score signifies your creditworthiness and is used by them to assess the risk of approving a Credit Card. The higher your credit score, the higher your credit limit and the lower your interest rate.
Income
Your income level helps determine whether you can afford monthly payments on the Credit Card balance. Banks typically require proof of income to assess your ability to repay debts. They will ask you to submit documents supporting your income source, such as salary slips or income tax returns.
Credit history
Banks look at your credit history to see how you have managed credit. They assess factors, including your payment history and credit utilisation. Your transaction history is crucial in determining your Credit Card application.
Debt-to-income ratio
The debt-to-income ratio helps banks compare your monthly debt payments to your income. Banks use it to evaluate your ability to take on additional debt. A lower debt-to-income ratio typically indicates better creditworthiness and a higher debt-to-income ratio will decrease your eligibility.
Financial commitments
To determine whether you can handle additional credit, banks may consider your existing debts, such as pre-existing Loans or other Credit Cards. They might only approve your application if you are responsible enough for your previous debt payments. Therefore, being financially responsible and stable is imperative for Credit Card applications.
Credit Card specific criteria
Some cards might have specific criteria, such as minimum income requirements or credit score thresholds. They also target consumer groups such as students, working professionals, business owners, and more.
Constant credit inquiries
Numerous Credit Card applications can also impact your Credit Card eligibility. Recent inquiries signal to banks that you seek credit from various sources, which could be perceived as a risk. Rather than constantly applying for a Credit Card, spread your applications and inquiries over some time.
Residence
Credit Card issuers also consider your residential status. Some Credit Cards are only available in a particular city or region.
Conclusion
It is important to note that each bank weighs these factors differently when evaluating your Credit Card application. Following the eligibility criteria does not guarantee approval, as banks gather a complete view of your financial situation and creditworthiness. Every applicant should review the Credit Card issuer’s requirements and ensure you meet them.
