Getting your first credit card is a huge milestone. It’s an essential first step in building your credit history and achieving financial freedom.
A recent study by TransUnion Philippines on how Filipinos perceive credit showed that 67% of Filipinos show high favorability towards credit cards. Further insights showed that 62% of Filipinos are likely to use credit cards in the coming year.
So, you decide to get one for yourself. You go to a bank, you eagerly fill up the paperwork, and you hope for the best. After all, you’ve already imagined the things you’ll be using your new card for. Suddenly, disappointment sets in when the bank tells you that your application was rejected. What gives?
Decoding the mysteries behind your credit score
There’s nothing fun about being rejected, and it’s only natural to wonder what went wrong.
While grappling with rejection and wondering what went wrong, it’s crucial to recognize that your credit score, a rating based on financial management, plays a significant role. This score affects your likelihood of obtaining credit cards and other financial services, offering more favorable rates and terms as it increases.
When it comes to being denied a credit card, one significant reason might be that your credit score is too low.
But what makes a low credit score? You’ve got to consider factors such as your payment history, length of credit history, types of credit used, amount owed, and your number of new credit applications. Since you’re going for your first credit card, your lack of credit history might affect your score. The same goes for any late or missed payments for any other financial obligations you might have.
Turning rejection into opportunity
Getting rejected for that first credit card isn’t a dead end. There are several steps you can take to improve your credit score and increase the chances of getting your credit card application approved the next time you apply.
Here are a few tips to keep in mind:
Build your credit history
Seek out banks or fintech institutions that offer financial products such as small personal loans. Successfully paying off these loans can help build your credit history and improve your credit score. Opening a savings account at a bank can also help improve your credit record. Once your savings account is active and in good standing, applying for a credit card at the same bank could improve your chances of approval. That’s because the bank with which you opened your savings account is in the best position to verify your credit history.
Pay your bills on time
Always pay off any bills before their due dates. To save yourself the hassle of manually paying your bills one by one, some banks can automatically debit your bill payments from your savings account.
Avoid multiple applications
If a bank rejects your credit card application, should you try again with a different bank? No, you shouldn’t. Successive applications in a short span of time can cause your credit score to take a hit. It also gives banks the impression that you’re desperate for credit.
Be honest throughout the application process
Honesty is the best policy for a reason. Some applicants falsify records or submit fake documents such as pay slips or certificates of employment. However, banks and other financial institutions have surefire ways of determining whether those documents are indeed legitimate.
Find a stable source of income
Lenders need assurance that the people they extend credit cards to are able to pay their bills on time. That’s why many approved applicants are those with full-time jobs. If you’re a freelancer or self-employed, an approved application may boil down to how well you can show that your business or professional practice is profitable. Prepare to collect and show a lot of documents such as business permits, income tax returns, and more.
Apply for a credit card that fits your credit score
As a newcomer to credit, you probably won’t be able to qualify for credit cards with huge rewards and long 0% interest terms right away. However, all is not lost. Many credit cards intended for those new-to-credit offer good rewards and might not even charge annual fees. If you opened a savings account at a bank, having good history might even pre-qualify you for approval on certain cards.
Successfully applying for your first credit card can be an incredibly empowering experience. However, as the saying goes, with great power comes great responsibility.
One way to stay on top of your credit is by monitoring your credit reports. Additional data from the TransUnion Philippines credit perception study showed that 54% of Filipinos are comfortable monitoring their own transactions and expenses. To easily access your credit report and build the habit of monitoring your credit behavior, all it takes is a few clicks on Lista, the fastest-growing financial management app in the Philippines.
Through a partnership with the country’s leading credit bureau, CIBI Information Inc. (CIBI), The Credit Information Corporation (CIC), the country’s sole public credit registry and repository of credit information, has authorized Lista to access CIC credit data through CIBI as a non-accessing entity. This partnership enables Filipinos to access their credit reports and utilize other premium features on the Lista app such as the Credit Score Trend which shows users how their credit scores have performed in the span of six months.
“In the pursuit of greater financial inclusion, our partnership with CIBI is instrumental in helping more Filipinos create and maintain good financial habits,” said Khriztina Lim, Lista co-founder. “Through the Lista app, users can know their credit scores in just a few taps. This information is made instantly available to help users determine eligibility for credit cards and loans. They can also discover tips on how to improve their credit scores, all at a very accessible price.”
Get your credit score on Lista for only P199 per request. Users must prepare one valid ID for identity verification.