Getting your loan or credit card application approved requires more than just good intentions. No matter how sure you are about repaying the loan, if the bank thinks you are a risky customer, there are chances that your application will get rejected. Wondering what makes a bank think that you are a risky customer? Read on to find out.

Your poor credit history


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Your credit history is probably the first thing that banks check while reviewing your loan application and your credit worthiness. When a bank has your credit history, it knows everything about your financial position and your loan repayment capability. If you have applied for too many loans in a short period of time, that will also reflect in your credit history.

Of course, having a strong credit history improves your chances of securing a loan or a credit card. But if you have a poor credit history, there are chances that the bank might reject your application.

Not having credit history

Having poor credit history is definitely bad for your loan application. However, having no credit history doesn’t help either. When you don’t have any credit history, it gets tough for banks to assess your repayment behaviour and they might hesitate to lend you money. So, if you don’t have any credit history, start building it now. Apply for a credit card, make a few purchases with it, and keep paying your dues in time.

Your income is too less for the loan amount

Ever wondered why banks ask for your recent payslip or income proof when you apply for a personal loan or a credit card? It’s for assessing your loan affordability. Based on your income level and your existing liabilities, banks figure out whether you will be able to repay the loan you are applying for. If your income is too less or highly unstable, the banks might see you as a risky customer and reject your application.

Your job is too risky

The nature of your job can also affect your chances of getting a loan. If it’s too risky or too unstable, banks might consider you a risky customer for the purpose of loans. If you have a habit of switching jobs frequently, it could also affect your loan application.

Your already have too many loans

If you have too many loans outstanding, there are chances that your loan application might get rejected – no matter how stable your income is. When reviewing your loan application, banks also consider your total debt servicing ratio, which is calculated as total monthly repayments divided by your gross monthly income.

Incorrect details in your loan application

Thinking about hiding or lying about something in your loan application? Bad idea. If you are providing wrong information to the bank, there are chances that bank will turn down your application once it discovers the truth about your lie.

Wondering how to improve your chances of getting loans?

  • Keep an eye on your credit report: It’s important to check your credit report regularly. It will help you know where you stand in terms of credit worthiness. If your report is not so good, you can take steps to improve it.
  • Keep your total debt servicing ratio under control: Your total monthly loan repayments should not be more than 60% of your gross monthly income.
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