Does Getting Denied for a Credit Card Affect Your Score?

FT Contributor
A person viewing a credit card application site, finding that their application has been denied.

If you’ve been denied a credit card, your credit score may drop, but it’s not from the rejected credit card application. Getting denied won’t affect your credit score because rejected credit card applications aren’t reported to the credit bureaus. There is no score penalty for being denied but your credit score may nevertheless drop a few points. If you’re wondering why, read on to learn how a credit card application could affect your credit score.

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Why Does Your Credit Score Drop?

Each time you apply for a credit card, loan, or other type of credit product, a hard inquiry is triggered. Hard inquiries will show on your credit report and may temporarily lower your credit score by a few points, regardless of whether you’re approved or declined.

There’s some good news — the credit bureaus won’t report duplicate hard inquiries made within a certain period of time if they are the same type of credit application. If you apply for three different credit cards within two weeks, for example, your credit report will only show one hard inquiry.

Depending on the credit bureau, you may have 14 to 45 days to apply for additional credit cards without another hard inquiry on your credit report. You could take advantage of this rule by applying for other credit cards within a few days of the first one without incurring further impact on your credit score. You’ll need to be strategic about which card you apply for next.

Do some research on the card you applied for to get an idea of why you could have been denied. The credit card issuer is required by law to send you a letter of why you were denied for the credit card, but the letter could take weeks to arrive. Since time is of the essence, look online for information about credit score and income requirements for the card you applied for.

If you needed excellent credit to get approved but only have fair credit, you’ll have a better idea of what type of credit card you’re more likely to qualify for. To improve your chances of success, research backup credit cards with lower requirements than the one for which you were declined, and try applying for a couple of other cards soon after your first declination.

How Credit Card Applications Affect Credit Scores

There are a couple of ways a credit card or any other type of loan or credit application can affect your credit score. Now you’re familiar with a hard inquiry, but there’s something called a soft inquiry, too.

Hard Inquiries vs. Soft Inquiries

A soft inquiry doesn’t affect your credit score the same way a hard inquiry would. Soft inquiries on your credit may happen more often than you think. If you’ve ever received a pre-approved credit card offer in the mail, the card company performed a soft inquiry on your credit to determine whether you qualify for the credit card, at no detriment to your credit.

Other occasions a soft inquiry to review your credit may be made with or without your knowledge include:

  • When you check your credit report;
  • If an employer or landlord performs a background check;
  • If you’re signing up for insurance;
  • As a periodic check from your existing credit card companies or other lines of credit;
  • On certain occasions when you’re checking rates on a loan.

Fortunately, your credit score won’t be affected by a soft pull — and it’s a good thing. In a few of the scenarios, you have no control over when or why an existing lender chooses to check your credit.

Insurance companies might check your credit to determine how risky you may be as a customer and set your premium accordingly. As for existing credit card providers, they might periodically perform a soft pull to look for changes in your financial situation, which may signal that you’re no longer able to afford a high credit limit or your monthly payments.

How Many Inquiries Is Too Many?

As mentioned, a hard inquiry will temporarily lower your credit score. The drop is typically five to 10 points per inquiry. Credit bureaus typically bundle a series of hard credit inquiries into one if they’re the same type of inquiry and happen within a period of 14 to 45 days, depending on the credit bureau’s scoring model.

This means that a few credit card applications within a week may only show as one hard inquiry, dropping your score no more than 10 points. But if you apply for a credit card and a vehicle loan all within 30 days, they will show as two separate inquiries, dropping your score lower.

When you’re deciding on how many inquiries are too many, it depends on your credit score. One or two hard inquiries shouldn’t greatly affect your credit if you have a good to excellent credit score. But if you’re teetering on the edge between a fair and good credit score, a single drop of five to 10 points could place you out of reach of credit products for people with good credit.

Can You Remove Inquiries From Your Credit Score?

You can’t remove an inquiry from your credit report if it’s accurate, but rest assured, the inquiry will go away after two years. The only types of inquiries you could successfully eliminate are incorrect ones, such as those due to identity theft or error. You can uncover erroneous marks against your credit when you check your credit report. If you see unusual activity on your credit report, create a credit inquiry removal letter to submit to the credit bureaus.

If the five-to-10-point drop affects your credit standing adversely, there are more effective ways to improve your credit rating. Create a personal budget and get your spending under control, pay down your balances, consider applying for a secured credit card to build credit, and make sure you pay your credit card bills on time.

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