Does Getting Denied for a Credit Card Hurt Your Score?

Applying for a credit card has become routine, but a rejection is usually very disheartening. Many people are eager to know if the denial of credit cards impacts their credit score.

It is simple; it has no impact, but there’s more to say. The author details the impact of a credit card denial and what happens to your credit score when you apply for a new card.

What Happens to Your Credit Score When You Apply for a Credit Card?

When you apply for a credit card, the lender typically performs a hard inquiry (a hard pull) on your credit report. A hard inquiry allows the lender to assess your creditworthiness, checking factors like your credit history, debt-to-income ratio, and payment history. This inquiry usually results in a slight, temporary dip in your credit score.

A hard inquiry typically causes your score to drop by about 5-10 points, depending on your credit history. However, if you apply for multiple cards quickly, the cumulative effect of several hard inquiries could significantly impact your score.

Does a Credit Card Denial Directly Affect Your Credit Score?

No, being denied a credit card does not directly impact your credit score. The denial is not reported to the credit bureaus so that it won’t appear on your credit report. However, the hard inquiry when you apply for a credit card still affects your score, even if the application is denied.

While the rejection doesn’t harm your score, the reasons behind the denial might indicate financial issues that must be addressed. For instance, those factors could negatively affect your score if you’re denied because of high debt or missed payments.

How Credit Inquiries Impact Your Credit Score?

As mentioned earlier, credit card applications lead to complex inquiries. These inquiries remain on your credit report for up to two years but typically only affect your score for about 12 months. Hard inquiries are part of the “new credit” category of your credit score, which accounts for 10% of your total score.

While a single inquiry will likely cause only a minor dip in your score, multiple hard inquiries within a short time frame can signal to lenders that you’re a high-risk borrower. This may lead to further rejections or unfavorable terms if you are eventually approved for a credit card.

If you’re denied a card, it’s essential to avoid quickly applying for another one, as this could lead to additional hard inquiries and a further reduction in your credit score.

What to Do After Getting Denied for a Credit Card?

After being denied a credit card, the issuer must send you an adverse action notice. This notice will detail the reasons for the denial. Common reasons include a low credit score, a high debt-to-income ratio, or too many recent inquiries.

Use this information to improve your financial standing before applying for another card. For example:

• Pay off outstanding debt to lower your credit utilization ratio.
• Dispute any errors on your credit report.
• Make on-time payments to boost your score.
• Taking the time to address these issues can increase your chances of being approved for a credit card in the future.

How to Minimize Credit Score Damage When Applying for Credit?

To avoid unnecessary damage to your credit score, follow these best practices when applying for credit:

• Check your credit score before applying. Knowing where you stand can help you target cards for which you’re more likely to be approved.
• Limit the number of applications. To minimize hard inquiries, avoid applying for multiple credit cards quickly.
• Consider pre-qualification offers. Many card issuers offer pre-qualification checks, which only result in a soft inquiry and have no effect on your credit score.
• Taking these steps can help ensure your credit score remains intact while increasing your chances of approval.

Read related blogs: What are the best credit cards to build credit?

Conclusion

Even though a rejection for a credit card does not directly impact your credit score, applying for one will have a hard inquiry take place and may even cause a slight momentary drop.

The key to protecting your credit lies in being careful about your applications for new credit and when you apply. Beem helps you stay informed about the factors that impact your credit score with free credit monitoring, offering tools to maintain or improve it, even after a credit card rejection.

People Also Ask

Does getting denied for a credit card appear on your credit report?

No, a denial does not show up on your credit report. However, the hard inquiry made by the lender during the application process will be recorded.

How many points does your credit score drop when applying for a card?

A hard inquiry can lower your credit score by 5 to 10 points, but the impact is typically short-lived.

Can you apply for another credit card after being denied?

Yes, you can, but it’s advisable to wait and address the reasons for the denial before reapplying to avoid further damage to your credit score.