If you’ve ever applied for a credit card in the Philippines, you know that it often feels like a crapshoot. Although it’s common knowledge that you don’t always get approved for one, the reasons behind it are unfamiliar to the many credit card applicants nationwide.
In this series, we at GoBear will attempt to shed light on the most common reasons why your credit card application wasn’t approved. We start with the loans you have when you applied for a credit card.
How do existing loans affect your credit card application?
Applying for several loans or credit cards
While applying for several loans may seem like the prudent thing to do, doing so might actually hurt your chances of getting a credit card. Yes, even inquiries raise a red flag on your credit card application. Two reasons make credit card providers wary of your loan or credit card inquiry and application spree: first, it sends the message that you already applied for several other providers and got denied for one reason or another; second, it tells providers that you already have several loans or accounts open, which can be a signifier of financial problems. If you’re applying for a credit card, it’s best to avoid shopping around for several loans or accounts or at least keep them at a minimum.
Arguably, the biggest portion of your credit score is made up of your payment history. This is why providers impose relatively hefty penalties on payments that are late for even a few hours. You might find that sometimes the interest rate for your payment can go from 0% to 30% overnight. Late payments, combined with a high balance, can be the deciding factor on whether you can get a credit card or not.
Being a guarantor or co-signer on a loan
Yes, being a friend is a good thing; however, it can be your downfall when it comes to credit card application. Co-signing for a loan may seem like a small favor, but you must remember that by doing so, you take responsibility for the decisions of the person you signed for—regardless of whether these decisions are good or bad. In fact, you’ll be held responsible for repayment of the loan in case the other person defaults on paying the agreed upon installments. The worst part is that you may not even be aware that the loan is delinquent; lenders generally don’t contact the co-signer until the account is 90 days late. This delinquency, even though it isn’t really your fault, will appear on your credit report.