Reasons why your credit is not approved

When applying for any type of credit – whether through a personal loan or even a credit card – it's normal to experience a period of anxiety. 

This happens because, due to numerous factors, your request may or may not be approved.

When the request is successful and the loan is approved, it's cause for celebration for the customer. But what happens when the request is denied? 

This happens to a lot of people, and it can be a very frustrating situation. 

And at that moment, the first thought is “Why was my request declined?” And that’s what we’re going to talk about today!

In this content, we will cover the main reasons why someone might have their credit application declined and ways to deal with this negative response. 

And, to make it easier for you to read, we have divided the text into the following topics:

• 5 reasons why your credit is not approved
• Main forms of analysis of institutions

5 reasons why your credit is not approved

When a customer seeks a credit alternative, they never expect to receive a response.

In the end, the customer almost always already has a pre-defined destination before even getting a response to the request.

Whether it's a personal loan – to carry out a project, such as a renovation or to purchase a good – or even a credit card application – to make everyday purchases with more peace of mind – the feeling of frustration is the same.

Check out the list of 5 reasons why your credit may not be approved.

A poor payment history

During the analysis carried out by the institutions, you can be sure that they do not miss anything.

Therefore, your payment history is also taken into account when getting a response about your loan.

Therefore, it is very important that you always try to keep your debt payments up to date, without delays.

This way, the institution will understand that you are a “trustworthy” person and the chances of defaults and late payments are lower than someone with a bad history.

Your ability to pay

I don't even need to say that payment capacity is a very important criterion for institutions when granting credit to their customers, right?

If, upon analyzing the request, the institution concludes that the customer does not have the necessary resources to cover the payments, it will deny the request.

This also happens when, when applying for a credit card for the first time, the limit released is well below what you expected.

The release of the limit is also directly linked to the payment capacity.

When releasing a low limit, the institution wants to “get to know you better” before releasing a higher limit.

As you use your card and pay your bills correctly, your relationship with the institution will become increasingly solid, resulting in a credit limit increase in the future.

Your score

Your score level may be the main reason for the negative responses you've received.

The value, which can range from zero to one thousand, is an indicator of the customer's risk of default that is taken into account during the credit analysis.

The closer you are to the maximum amount, the greater the chances of your request being approved.

When your score is very low, the institution understands that there is a high chance of default if the credit is released, resulting in the denial of the card application.

Your monthly income

Other criteria that institutions take into consideration is income.

Unlike the banks presented throughout this text, the lack of proof of income can make all the difference when your card application is being evaluated.

When checking a customer's proof of income, financial institutions want to ensure that the installments on a credit card fit the customer's budget and that the card limit is compatible with their salary.

This is because, to ensure that the budget is not compromised, ideally these expenses should not exceed 30% of the applicant's salary.

This ends up being a major obstacle for professionals who do not have proof of income – such as informal workers, self-employed workers, and university students without formal employment.

When applying, the applicant often has a stable source of income but is unable to obtain their card due to this bureaucracy.

The famous “dirty name”

And last but not least: the “dirty name”.

This is probably the reason for the list that causes the most negative responses to credit applications.

Many people live with a negative CPF without even knowing it. This happens because, by leaving a certain debt behind—and even causing it to be forgotten—the customer's name ends up being negatively impacted, resulting in the infamous "bad credit rating."

And in most cases, the initial amounts of these debts aren't even that high. But over time, these debts can increase due to interest.

Therefore, if these smaller debts are not given due attention, they can snowball into serious debts.

And this, in addition to creating a future headache, also interferes with your credit application. 
Main forms of analysis of institutions

Of course, this is a more individual criterion, and it can vary according to the internal policies of one institution to another.

But among the main forms of analysis used by financial institutions are:

Analysis of your documentation

At this stage, the institution performs a complete analysis of all your documentation before approving or denying your request.

Therefore, it's important to be very careful when filling out your information. One incorrect piece of information can make all the difference in the response to your request.

Consultation with credit protection agencies

Another way to analyze the customer's profile is to consult the customer's history with the responsible bodies, such as SPC and Serasa. When there is any pending issue in the customer's name, it is almost certain that the request will be denied.

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