Does Being Rejected for Credit Cards Affect Your Credit Score?

A credit score is a fragile thing. It takes years to build up a strong credit history, but you can destroy it in weeks. A single rejected credit card application should not hurt your credit score, but multiple applications will. If you've had an application rejected, try to find out why, so you don't make the same mistake a second time.

Credit Scores

Credit bureaus use complicated secret formulas to calculate your credit score. They plug in all of the information from your credit report and come up with a three-digit number that tells lenders at a glance how credit-worthy you are. Many factors go into these calculations, but the two biggest are your total debt and your repayment history. The length and type of credit also make a difference, as does the number of recent credit applications.

Credit Application Rejections

Every time a lender checks your credit score, it appears on your report. Submitting several credit applications within a short period of time makes you look desperate for money, which marks you as a poor prospect for lenders. Note, however, that the report doesn't say whether your application was successful. Thus, a single rejected application looks no different on your credit report from an accepted one. Where people get into trouble is with multiple applications. Getting rejected for one application and then filing another is likely to hurt your credit score.

Credit Reports

Knowing what's in your credit report can help you determine why a credit card issuer rejected your application. You can get a free report once a year from each of the three credit bureaus by visiting AnnualCreditReport.com (see Resources). Alternatively, you can request a copy directly from each bureau. The free reports will not include your credit score, but you can use them to check whether anything is wrong. If you spot a mistake, file a claim directly with the issuing bureau to get it rectified. If you want to know your credit score, you can get that from the bureaus as well, but they will charge you a fee.

Improving Your Credit Score

You can improve your credit score by making all of your payments on time, month after month. You can also raise it by paying off some debt and lowering your debt-to-credit ratio. Avoid making too many credit applications, or canceling all your credit cards in a short period of time. Also, try to diversify your credit to include more than just credit cards. Once you've improved your score, you will not have to worry about future credit card rejections.