Key Factors That Determine Your Credit Card Eligibility

  

Credit cards have become an essential part of our lives, providing us with convenience, and numerous benefits like reward points, cashback, discounts, and the latest deals. However, not everyone can easily obtain a credit card. The eligibility criteria for obtaining a credit card may vary from one bank to another, and specific key factors impact your credit card eligibility.

Key Factors That Determine Your Credit Card Eligibility

Credit Score

Your credit score is a major determinant of your eligibility for a credit card. A credit score is a numerical representation of your creditworthiness based on your past financial behavior. A good credit score reflects creditworthiness, while a low score may reduce the chances of approval or lead to low credit limit sanctions.

A credit score can range from 300-900 in India. Generally, a credit score of 750 or above is considered good enough to apply for a credit card. The bank verifies the credit history to determine the payment behavior, credit utilization, past defaults, delayed payments, and other factors to approve or reject your credit card application.

Age and Income

Your age and income play a significant role in determining your credit card eligibility. To apply for a credit card, you need to be at least 18 years old. Your income also determines the credit limit, and if you are eligible for a credit card. Banks usually prefer individuals with a stable income source and a regular salary slip.

Depending on your monthly income, banks decide the credit limit on your card. An individual earning INR 15,00,000 per annum is likely to get a higher credit limit compared to someone earning INR 3,00,000 per annum. Some credit cards come with a minimum income requirement, and it’s essential to check the eligibility criteria before applying for a credit card.

Employment Status

Your employment status also has a significant impact on credit card eligibility. Banks prefer individuals with a stable employment history and regular income. The chances of approval are higher if you are a salaried employee, compared to individuals who are self-employed or unemployed.

Bank Account and Transaction History

Your bank account transactions, including savings, investments, and loans, are indicative of your financial behavior. Banks review the transaction history to assess your capacity to handle credit your regular banking transactions and your current account balance to determine your credit card eligibility.

Generally, if you have an existing savings account or relationship with the bank, the chances of approval for a credit card are higher. The bank may also offer you a pre-approved credit card if they consider your banking history viable.

Credit Utilization Ratio

The credit utilization ratio is the percentage of how much credit you use compared to your credit limit. For example, if your credit limit is INR 50,000, and you have spent INR 25,000, your credit utilization ratio is 50%. Banks often review this ratio to assess the loan repayment history and creditworthiness.

A high credit utilization ratio may increase the chances of rejection or low credit limit sanctions. A credit card applicant should aim to use no more than 30% of the credit limit to maintain a good utilization ratio and avoid financial stress.

Credit Card Applications

Multiple credit card applications within a short period of time can reduce your creditworthiness and affect your credit score. Applying for multiple credit cards simultaneously may indicate financial instability and cause doubts among lenders.

Final Thoughts

Credit card eligibility criteria may vary from one bank to another and can affect how you use your card and its benefits. It’s essential to check the credit card eligibility criteria of different banks, read the terms and conditions, and understand the annual fee, reward points, interest rate, and other credit card features before applying. A credit card applicant needs to maintain a positive credit score, stable income, and a healthy banking relationship to increase his or her chances of approval.