Rejected for a personal loan or credit card? Here's why your application could have failed

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It can be frustrating to be rejected for a personal loan or credit card, especially when you don't have a clue why. Financial institutions and banks are also making lending stricter during 2025 as default on credit rises, so more than ever it is critical that you are aware of why your application will be rejected. Understanding the most common reasons will allow you to make the necessary changes and be accepted the next time.

Poor or low credit rating

Low credit rating is probably the most common reason for rejection. Banks and NBFCs tend to prefer a rating of more than 750 to approve personal loans and high-end credit cards. If you have a poor rating — due to late EMIs, misuse of credit limits, or previous defaults — the lender may look upon you as a risky borrower.

Inadequate or variable income

Lenders assess your repayment capacity based on your income and employment stability. If your income doesn’t meet the lender’s minimum threshold, or if you’ve recently changed jobs or work on a freelance basis without regular income proof, your application could be turned down.

Existing high debt burden

If you had loans whose EMIs you are already repaying or if your credit card bills absorb more than 40%–50% of your salary, the lender can reject your application. This, based on your debt-to-income ratio — the higher the ratio, the weaker your repayment capability.

Incomplete or erroneous documentation

Applications with incomplete KYC documents, different signatures, or outdated income proofs are generally rejected without even entering into the credit checking process. Make sure your PAN, Aadhaar, and income statements are uploaded in the right manner.

Multiple applications in immediate vicinity

If you’ve applied to several banks or NBFCs within a short span, your credit report may show multiple hard inquiries. This suggests credit-hungry behaviour, which reduces your chances of approval, even if your score is decent.

FAQs

1. Will checking my credit score often lower it?

No, checking your own credit score is a "soft inquiry" and won't harm your score. But multiple lender inquiries within a short time will harm it.

2. How long do I have to wait before reapplying if I've been rejected?

You can wait at least 3–6 months, look at your credit report, correct the issues, and raise your credit score before you reapply.

3. Can I get a loan with a bad credit rating?

Some NBFCs give loans to people of bad scores but at a higher rate of interest. The next choice is taking a secured loan by pledging something.