Does Getting Denied for a Credit Card Hurt Your Score?
Learn how credit card applications impact credit, why they might be rejected and how to improve your chances of approval
Applying for a credit card and being denied can be frustrating—especially if you’re worried it might impact your credit scores. But getting denied doesn’t directly hurt your credit scores. Instead, applying may lower your credit scores—usually by just a few points, according to credit-scoring company FICO®—because applying for a credit card will trigger a hard inquiry.
As the Consumer Financial Protection Bureau (CFPB) explains, credit-scoring models generally look at how recently—and how often—you’ve applied for credit. But they don’t take into account whether your applications were approved.
You may be able to avoid denials and unnecessary hard inquiries into your credit if you understand why a credit card application might be rejected. Read on to learn more about credit card application rejections and how you might be able to improve your chances of approval.
Why a Credit Card Application Might Be Rejected
When it comes to approving a credit card application, issuers have their own credit policies. They set their own requirements and can consider multiple factors, including things like an applicant’s credit.
The Importance of Credit
Why is credit important when you’re applying for a credit card? Because your credit history and credit scores are indications of how well you’ve managed debt in the past—and how likely you are to pay back your lenders. And the better your credit, the better your chances of approval might be.
Think of it like this: A positive credit history and good credit scores may suggest that you’re good at managing your finances and you use credit responsibly. But low credit scores may give the opposite impression.
So if a credit card application is rejected, your credit could be a factor. And credit can be dragged down by negative information. That could include things like:
- Missed or late payments, including late credit card payments.
- Too many hard credit inquiries.
- A high credit utilization ratio.
- Lack of credit history.
Keep in mind that lenders can look at more than just an applicant’s credit. For example, lenders may also consider things like an applicant’s employment status, income and debt-to-income ratio. And if the applicant has been a customer, the lender may consider previous experiences with the customer, too.
The Equal Credit Opportunity Act (ECOA)
If your credit application is declined, you have the right to know why.
The Equal Credit Opportunity Act (ECOA) is a landmark civil rights law that protects consumers from credit discrimination on the basis of race, color, religion, national origin, sex, marital status and age, among other things. If a consumer suspects a lender has been discriminatory, they can take action, thanks in part to the ECOA.
How to Improve Your Chances of Approval
Checking whether you’re pre-approved or pre-qualified is a great way to improve your chances of approval—and to avoid unnecessary hard inquiries on your credit reports. Pre-approval or pre-qualification can help you compare options and find out whether you might be approved for a credit card before you even apply for one.
With Capital One’s pre-approval tool, for example, you can find out whether you’re pre-approved for some of Capital One’s credit cards before you submit an application. It’s quick and only requires some basic info. And checking it won’t hurt your credit scores, since it only requires a soft inquiry.
But what if you need to improve your credit in order to qualify for a credit card? Here are a few ideas that could help you improve your credit before applying:
- Monitor your credit. Keeping tabs on your credit can help you spot opportunities for improvement and even catch mistakes. You can get free copies of your credit reports from AnnualCreditReport.com. And with CreditWise from Capital One, you can access your TransUnion® credit report and weekly VantageScore® 3.0 credit score—without hurting your score. CreditWise is free for everyone. You don’t even have to be a Capital One customer to use it.
- Pay your bills on time. Your payment history is an important factor when it comes to your credit scores. So catching up on missed and late payments can be an important step in rebuilding your credit. You could even consider setting up automatic payments to help you make future payments on time.
- Stay well below your credit limits. According to the CFPB, “Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.”
- Try to pay your balances in full. The CFPB says that you should always pay as much of your full credit card balance as you can. Paying off your balance every billing cycle can ensure that you stay well below your credit limits. And that can help you keep your credit utilization ratio down. As the CFPB explains, “You don’t need to revolve on credit cards to get a good score. Paying off the balance each month helps get you the best scores.”
- Apply only for the credit you need. “If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively,” the CFPB explains. So try to apply for credit only when you truly need it.
- Become an authorized user. If you have no credit history, you could explore becoming an authorized user on a trusted friend’s or family member’s account.
- Consider a secured credit card. If you’re building or rebuilding your credit, you might not be able to qualify for a traditional credit card. But a secured credit card could be an option.
Keep in mind that rebuilding your credit or building credit from scratch takes time. So it might be a good idea to avoid immediately reapplying for a credit card. Instead, consider giving yourself some time to improve your credit before you submit another application.
And don’t forget that pre-approval or pre-qualification can help you find out whether you might be eligible for a card before you even apply.
Consider Your Options Before Applying for a Credit Card
Remember: A credit card application might be rejected for a variety of reasons. But a rejection doesn’t directly hurt your credit scores. However, applying may lower your credit scores by just a few points since it will trigger a hard inquiry.
The good news? You might be able to avoid rejections and unnecessary hard inquiries by checking to see whether you’re pre-approved or pre-qualified before you even apply. And if you need to improve your credit before applying, there are a number of different options worth considering
Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.