Submitting a credit card application and receiving notice that you're denied is a disappointment, especially if your credit score drops after applying.
However, the reason your score decreases after getting denied has nothing to do with the lender's decision to reject your application (and the same goes for credit approvals).
Instead, the lender's inquiry into your credit history is what may have hurt your credit score. Below, Select reviews how applying for credit impacts your credit score, why you may be denied and how to increase your approval odds.
How does applying for a credit card affect your credit?
When you apply for new credit, the lender will typically perform a credit check. This often results in a hard inquiry into your credit history, which means the lender pulls your credit report from one of the main three credit bureaus—Experian, Equifax or TransUnion.
Hard inquiries appear on the credit report pulled by the lender. For example, if you apply for the Apple Card, your TransUnion credit report will be accessed, according to Apple's website. This will cause an inquiry to appear on your TransUnion report (not your Equifax or Experian reports) and may result in a temporary decrease in your credit score.
The drop in your credit score is often insignificant and roughly 5 points. The impact decreases over time despite inquiries remaining on your credit report for two years.
Why you may be denied for a credit card and how to increase approval odds
If you're denied for a credit card, it's not the end of the world — you still have options. You should review the reason(s) why you were rejected and take the appropriate actions to fix any issues.
Below are some reasons you may be denied for a credit card and how to improve your approval odds.
Short or insufficient credit history
If you lack a credit file and are considered "credit invisible," you'll find it difficult to be approved for credit cards that require a credit history and perform hard inquiries.
How to improve it: Work on building credit by becoming an authorized user on someone else's card or consider applying for cards that don't require a credit history, such as the Petal® 2 "Cash Back, No Fees" Visa® Credit Card (be aware that if you do have a credit history, that does factor into the credit decision).
Secured cards, such as the Capital One Platinum Secured Credit Card (see rates and fees), also typically provide better qualification odds for credit newbies and can be used just like an unsecured card, but require a refundable security deposit in order to receive a line of credit.
Too many inquiries
Submitting several credit applications within a short period of time may cause lenders to consider you a risk. Plus your credit score may drop with each new inquiry. While one inquiry won't make or break your credit score, multiple inquiries can add up and be the difference between fair credit and good credit.
How to fix it: Limit new applications as needed. There's no specific number of inquiries that's considered too many, but a good rule of thumb is to wait at least six months between applications and to only apply when you have a real need for new credit.
Missed or late payments
Payment history is the most important factor of your credit score, which makes it essential to pay every bill on time. Late or missed payments have a significant negative impact on your credit score and can be the reason you're denied.
How to fix it: Set up autopay for at least the minimum payment so your account is kept current. However, aim to pay the balance in full by your due date to avoid carrying a balance and incurring late fees. You can also consider opening a credit card with no late fees, such as the Apple Card.
Credit card debt
Carrying a balance month-to-month results in a high credit utilization rate, which is the percentage of credit you're using. This is the second-most important factor of your credit score. A high balance may pose you as a risk to lenders and result in rejected applications.
How to fix it:Aim to maintain a utilization rate as low as possible, preferably 10% or less. Make a plan to pay off your debt faster by using a balance transfer card that offers no interest for up to 21 months. For example, the Citi Simplicity® Cardoffers a 0% introductory APR for the first 21 months on balance transfers from date of first transfer (after 19.24% - 29.99% variable; see rates and fees). Balance transfers must be completed within four months of account opening. There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Don't miss:
- What does it mean to be credit invisible?
- When is the best time to apply for a credit card?
- Nearly 1 in 4 Americans without a credit card don't qualify—here's why you may be denied
Information about the Apple Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
Petal 2 Visa Credit Card issued by WebBank.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
By itself, a denied credit card application won't have any impact on your credit scores. However, every time you apply for any type of new credit, it results in a hard inquiry on your credit report.
Does your credit card being declined affect your credit score? ›
A denial or approval won't hurt your credit scores, because decisions aren't reflected in credit reports.
Does it affect your credit if you are denied? ›
The Bottom Line
Getting denied for a loan or credit card will not be recorded on your credit report, and it will not directly impact your credit scores. To improve the chances that you'll be approved for credit, you may want to take a look at your credit before you apply, and take steps to improve it if you need to.
Does a declined affect your credit score? ›
No, denied credit applications won't appear on your credit report. Lenders don't report whether your applications were approved or denied because even approved applications don't necessarily result in a new account. Generally, if you're approved for a credit card, the card issuer will open the account automatically.
How much does a credit card application affect your credit score? ›
A new inquiry typically takes less than five points off your FICO scores, according to FICO. A hard pull, or hard inquiry, stops impacting your credit score in a few months to a year, but it stays on your credit report for about two years.
Should I apply for another credit card after being denied? ›
Wait to reapply
How long you should wait to reapply for a credit card after an application is denied varies with each person's situation, so there's no hard-and-fast timeline to follow. The typical recommendation is that you should wait six months between credit card applications.
How do I build credit if I keep getting denied? ›
4. Improve Your Credit
- Always pay your bills on time and get caught up on past-due payments.
- Pay off collection or charge-off accounts.
- Pay down high credit card balances and keep them low.
- Look for inaccurate or fraudulent information on your credit report. ...
- Avoid closing old credit card accounts.
First, find out what caused the lender to turn you down. If a lender rejects your application, it's required under the Equal Credit Opportunity Act (ECOA) to tell you the specific reasons your application was rejected or tell you that you have the right to learn the reasons if you ask within 60 days.
How long does declined credit stay on file? ›
Two years. All enquiries for credit are removed from credit reports after two years, although credit rating agencies do not record whether an application for credit is refused or accepted.
What are the three reasons you can be denied credit? ›
Reasons you may be denied for a credit card
- Insufficient credit history. If you have a short or nonexistent credit history, you may not qualify for a credit card. ...
- Low income or unemployed. ...
- Missed payments. ...
- You're carrying debt. ...
- Too many credit inquiries. ...
- Don't meet age requirements. ...
- There are errors on your credit report.
18 years old
Consumers can apply for credit cards starting at age 18, but the law requires them to have an independent income or a co-signer. However, most major issuers don't allow co-signers anymore. So, a person aged 18, 19 or 20 usually has to earn and prove their own income before being approved for a credit card.
What hurts your credit score? ›
Highlights: Even one late payment can cause credit scores to drop. Carrying high balances may also impact credit scores. Closing a credit card account may impact your debt to credit utilization ratio.
How many credit cards are too many? ›
Owning more than two or three credit cards can become unmanageable for many people. However, your credit needs and financial situation are unique, so there's no hard and fast rule about how many credit cards are too many. The important thing is to make sure that you use your credit cards responsibly.
Why is my credit score going down when I pay on time? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Is Capital One a good credit card? ›
But Capital One's cards are more than hype — they include generous rewards cards as well as excellent products for business owners, students and those with average or poor credit.
Why did my credit score drop 100 points after opening a credit card? ›
When you open a new credit account, it lowers the overall age of your credit. In addition to the age of credit, opening up any new credit account generally requires a hard inquiry, which could ding your credit score a few points temporarily. After about two years, the inquiry should drop off.
What happens if a transaction is declined? ›
If your transaction was declined, most banks will still hold the charge as “pending.” Most pending charges disappear in around 5 days or less, though some institutions ask cardholders to allow up to 7 days to process charges.
Does credit limit increase decline affect credit score? ›
If you request a credit limit increase, your credit card issuer may perform a hard inquiry on your credit, which may temporarily lower your credit scores. If an issuer automatically raises a cardholder's credit limit, it may involve a soft inquiry, which doesn't affect credit scores.
Why am I getting denied credit cards with good credit score? ›
Among the reasons you might be denied for a credit card with good credit is issuer restrictions. Many credit card issuers have rules that automatically decline new applications after the cardholder has a certain number of credit cards with a given bank, though they don't always advertise the limit.
How badly does a hard inquiry affect credit score? ›
A hard credit inquiry could lower your credit score by as much as 10 points, though in many cases, the damage probably won't be that significant. As FICO explains, “For most people, one additional credit inquiry will take less than five points off their FICO Scores.”
