Applying for a new credit card is relatively straightforward. You provide the requested information and wait a few minutes to receive a decision. Then you receive the decision screen, and it says denied. Frustration is common, but it’s understandable to transition to wondering how it will impact your creditworthiness.
Does getting denied for a credit card hurt your credit score? This guide explains why it may not be quite as bad as you fear.
Why was your credit card application declined?
Getting rejected for a credit card typically isn’t a fun situation. You may have several questions as to why your application was denied. Thankfully, you can find out exactly why your request for credit wasn’t approved.
According to Erica Kullberg, attorney, financial expert, and founder of Erika.com, “Under federal law, your application must trigger an ‘adverse action notice’ that explains why you were rejected for the card.” The issuing bank must send this letter to you within 30 days to notify you why the application was denied.
Common reasons for credit card rejection
Credit card issuers usually have a set of standards they compare you against when applying for a new card. If you don’t satisfy enough of them, your application may be denied.
Here are some reasons that could prevent you from getting a new credit card:
- Lack of stable income: Banks are notoriously risk averse. If you don’t earn enough income, are self-employed, or don’t have a stable work history, your application can be rejected.
- Low credit score: When you apply for a credit card, the bank will check your credit score. Depending on the card, you must fit within a certain credit score range. A very good score is typically over 740. While the best rewards cards are usually reserved for people with good to excellent credit scores, there are cards designed for those working on their credit as well.
- Missing payments: Payment history is the largest component of your credit score. If you have missing or late payments on your credit, you pose more of a risk, and your application may be denied because of this.
- Lack of credit history: Your history is another significant portion of your credit score. If you have insufficient history, you may be declined. You can consider asking a family member to make you an authorized user on their card if they have good credit, as that’s a possible way to boost your score.
- Excessive credit: Are you close to maxing out your current cards or have too much available credit? The issuing bank may fear you won’t be able to pay off the balances and reject your application.
If you feel that an error was made in processing your application, consult your credit report to identify any potential errors. You’ll want to dispute any errors to improve chances for future approvals.
Does a denied application affect your credit score?
Asking yourself if you apply for a credit card and get denied, and wondering how it might affect your credit is an understandable question. After all, rejection isn’t what you want. However, it is necessary to know why you might see a decline in your score.
Kullberg notes, “The rejection will not hurt your score, but the hard inquiry associated with the application might drop your score a few points for a while.”
A hard inquiry occurs when a lender or creditor pulls your credit when you apply for a loan or line of credit. This causes your credit score to decrease for a limited time, but it commonly bounces back. The rejection itself won’t harm your score, but too many inquiries in a limited time can.
How to improve your chances of credit card approval
Whenever you apply for a credit card or loan, it’s wise to put your best foot forward. Putting yourself in a good light can help improve your chances of success. It’s also essential to review the adverse action notice to identify any quick wins you can achieve.
These are some wise steps to take to improve the likelihood of approval on your next application.
Review and improve your credit score
Consulting your credit report can be a wise action in conjunction with reviewing the adverse action notice. You can get a free report annually from each of the credit reporting agencies – Equifax, Experian, and TransUnion. This should direct you where to begin.
Making on-time payments, keeping your credit utilization low, and paying down your indebtedness are all fantastic ways to improve your score.
Limit credit applications
Applying for too many credit cards in a short period of time is a red flag to most banks. Worse yet, it can further reduce your credit score. Moreover, you may end up with a card you don’t really want.
Focus instead on improving your credit and knowing what you need to get the card you want. Thoughtless applying can take you further from your goal.
Apply for the right card
There are a lot of possible credit cards you can apply for, depending on your situation. If you were denied approval for one, identify the types you may have success in getting. Applying for a credit card requiring excellent credit when you’re relatively new to credit, for example, may not be the best course of action.
Kullberg adds, “Apply for credit cards that match your credit score. If your score is low, for example, you might have more success with a secured card or one intended for building credit.”
Frequently asked questions about declined credit card applications
Getting denied for a credit card can feel defeating, but you’re not alone. A 2023 report from the Federal Reserve Bank of New York showed that nearly 20% of all credit card applications from the 12 months prior were rejected. With that in mind, here are some important questions to consider.
Does a declined credit card application show up on your credit report?
A denial or approval for a new credit card doesn’t show on your credit report. The hard inquiry will appear, but the rejection doesn’t appear on the report.
Can I reapply for a credit card immediately after being denied?
Theoretically, applying for a new card is possible after being denied. However, it’s likely not a prudent step. If there’s an error on your credit report, it’s reasonable to expect a rejection will happen again. Moreover, it may cause a red flag to the bank or result in you getting a card you don’t want.
Can I appeal the decision?
Do you believe the denial was in error? It’s possible that you can appeal the decision, as most card issuers have reconsideration lines to call. This lets you speak with a person to see if there’s a legitimate reason why your application should be approved.
The bottom line
It’s frustrating to apply for a credit card and receive a denial. Fortunately, in most cases, you receive a clear reason as to why you weren’t successful. Focus on the reasons why and take the necessary steps to improve your chances and creditworthiness in the future.
