Does Getting Denied for a Credit Card Hurt Your Credit Score?

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Does getting denied for a credit card hurt your credit score

Rejection can hurt your heart and your ego. But can it also hurt your credit score?

Whether you’re new to credit or just got blindsided by an unexpected “no,” the idea of a denied credit card application can feel like a major setback. But here’s the twist: the rejection itself isn’t the villain. 😈 It’s what happens during the application process that can leave a small dent.

Here we’ll dig into the question of “does getting denied for a credit card hurt your credit score?” – why credit card applications get denied and what steps you can take to improve your odds of approval next time. Spoiler alert: there’s a path forward, and it might be easier than you think.

Will getting rejected for a credit card hurt your score?

Let’s start with the good news: While that “credit card application denied” message is not fun to get, being denied for a credit card does not directly hurt your credit score. However, the application process might. When you apply for a credit card, lenders typically perform a hard credit inquiry to assess your creditworthiness.

Each hard inquiry stays on your report for up to two years and may reduce your credit score by as much as 5 points, depending on your credit history. 

Why you may be denied a credit card 

So, why would a lender give you the cold shoulder? Here are the top reasons and what you can do about them.

Low or insufficient credit score

Credit card issuers use your credit score as the ultimate crystal ball. A FICO score under 670 (the threshold for a “good” credit score) can often lands your application in the no-thanks pile, but every lender has their own credit score criteria, and some will accept a score of 580 and up. 

Insufficient credit history 

Without a history of responsible credit use, lenders may feel you’re too risky. For instance, if you’re fresh out of college with no credit history, your first application might be denied. Consider starting with a secured credit card or a student credit card to build credit safely.

Missed or late payments

A track record of missing payments can send lenders running. Payment history is the most important factor in your credit score, so those “oops” moments on past bills can seriously haunt your credit card applications.

For example: If you missed a car loan payment six months ago, you might struggle to get approved for a new card. Still, every lender has different criteria.

Bankruptcies or foreclosures

Bankruptcies and foreclosures linger on your credit report for years — seven for most derogatory marks and up to 10 for Chapter 7 bankruptcy. They signal to lenders that you’re high risk, regardless of any positive changes since then. A secured credit card is likely your only alternative here. 

Too many hard credit inquiries

Think of each credit inquiry as a small red flag. If lenders see multiple inquiries in a short time, they might assume you’re desperate for credit or overextending yourself.

Not to mention, while they only reduce your score slightly, that might be enough to kick it into the “no” zone. Also, this can kick off an anxiety-inducing cycle: 1) denied application hurt credit score 2) lowered credit score makes it harder to get accepted. (Below we’ll note some ways to break this cycle.) 

High credit utilization ratio 

A high credit utilization ratio — typically above 30% — can signal to lenders that you rely too heavily on credit. While there’s no hard-and-fast rule, using more than 30% of your available credit is generally viewed as risky. For example, if your credit limit is $10,000 and your balance is $4,000, your utilization rate is 40%. This could be a red flag to lenders, as it suggests you might struggle to manage additional credit responsibly.

Errors in your credit report

Sometimes, the culprit isn’t your behavior but errors in your credit report. A recent study by Consumer Reports and WorkMoney found that 44% of consumers discovered at least one error on their credit reports (CFPB). A typo or misreported debt could lead to unwarranted denials, so be sure to check your credit reports regularly and dispute any errors.

How to increase your approval odds when applying for a credit card

Ready to turn those “no thanks” into “welcome aboard”? Here are some tried-and-true strategies that can potentially help you in the qualification process.

Get prequalified

Many issuers offer a “soft inquiry” prequalification process that’s a great way to apply for credit cards without affecting credit score. While it doesn’t guarantee approval, it’s a solid starting point to see what cards you might qualify for without triggering a hard inquiry (and potentially lowering your credit score).

Monitor your credit

Knowledge is power. Use tools like MoneyLion’s credit monitoring feature to track your score and identify issues before applying for a card. Staying on top of your report can help you address errors or areas needing improvement.

Pay bills on time

Timely payments aren’t just good manners; they’re the backbone of a strong credit profile. Automate your bill payments to avoid missing due dates and to establish a history of reliability.

Follow the 30% rule

Keep your credit utilization ratio below 30%. If your credit card balance is creeping above that line, aim to pay it down before applying for new credit.

Don’t apply for more credit than you need

Applying for multiple cards within a short timeframe can make lenders skittish. Be strategic and space out applications by at least 6 months.

Consider a secured credit card

As noted above, secured credit cards can be your ticket to building or rebuilding credit. These cards require a deposit but often have a higher approval rate

Turn credit setbacks into comebacks 

While getting denied for a credit card may sting, it’s not the end of your financial world. Understanding why you were denied — whether it’s due to a low credit score, missed payments, or too many inquiries — is the first step to fixing the issue. By monitoring your credit, paying bills on time, and being strategic with applications, you can boost your odds of approval next time around.

And remember, MoneyLion is here to help you on your financial journey with tools like credit monitoring and access to personalized financial products.

FAQ

If you apply for a credit card and get denied does it affect your credit?

Getting denied won’t hurt your credit, but the hard inquiry from the application might. Keep applications spaced out to minimize score impact.

Why am I getting denied credit cards with good credit?

Your credit score isn’t the only factor. High credit utilization, errors on your report, or a lack of income could also play a role.

If you get denied for a credit card when can you apply again?

If you get denied for a credit card, wait at least six months before applying again to help improve your odds and minimize hard inquiries. 

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