What Happens If I Apply For a Credit Card and Get Denied?

If you applied for a credit card and your application was denied, you might be wondering, what happens after you denied for a credit card? We will provide you with everything you need to know about what happens after you apply for a credit card and get denied.

What Happens If I Apply For a Credit Card and Get Denied?

If you apply for a credit card and you get denied, nothing negative will be added to your credit report. However, a hard inquiry will be placed on your credit report regardless of whether you’re approved or denied a credit card. A single hard inquiry will only lower your credit score by a few points. Hard inquiries remain on your credit report for 2 years from the date that you applied for a credit card. If you’re denied, the credit card issuer is legally obligated to send you a letter known as an adverse action letter, explaining to you why you were denied the credit card you applied for.

Here are some common reasons why you may have been denied the credit card you applied for:

1. Negative Information – There may negative information on your credit report, such as missed payments, repossessions, or bankruptcy making it difficult for the lender to approve you for a credit card.

2. Limited Credit History – You may have been denied a credit card because you have little credit history. Typically, lenders like to see that you have aged open accounts that are in good standing to approve you for a credit card. So, if you’re applying for a credit for the first time, it’s likely that you have what is known as a thin credit file, making it difficult for the lender to approve you. This is so because lenders want to make sure that you’re likely to repay your debts on time, and with no history, they have no assurance that you’ll make your payments on time.

3. High Credit Utilization – If you have open credit cards with high balances, this means that you’re likely using too much of your available credit. Card issuers and banks do not want to lend money to people who have too much debt. Too much debt means there is a large likelihood that you’ll default on your monetary obligations, and so it’s a common reason for being denied a credit card. Typically, you should only utilize 10% of your available credit and never exceed 30% utilization. If you use more than 30% of your available credit, not only are your chances of being denied for a credit card high, but the high utilization could also lower your credit score.

4. Too Many Credit Card and Loan Applications – If you’ve submitted too many credit card and loan applications within a short period of time, this may be grounds for denial of a credit card. This is so because every time you submit a credit card or loan application, a hard inquiry is added to your credit report, alerting future lenders and creditors that you’ve recently been seeking credit. Lenders and credit card issuers do not like to see too many credit applications within a short period of time because it indicates that you’re actively seeking credit, which may signify financial difficulty. Lenders only want to lend money to people who can pay back the money they borrow.

5. Late Payments – If you have late payments on your credit report, this may be the reason you were denied a credit card. This is so because lenders want to lend money and issue credit cards to persons who will pay on time. If you have late payments on your credit report, this shows lenders that you have failed to honor your obligation to make your payments on time, making it less likely for them to lend you money. The more recent the late payment, the more likely it is that you will be denied a credit card.

What Should You Do If You Applied for a Credit Card and Got Denied?

If you applied for a credit card and were denied, it’s very difficult to be approved for the credit card you applied for. You can try to contact the card issuer and ask them to consider other sources of income that you did not include in your credit card application, such as alimony, child support, and other sources of income. But, doing so is unlikely to change the decision of the card issuer.

Additionally, if you have other credit cards with the card issuer you applied with, you can ask the card issuer to shift some of your other credit lines to the new credit card you applied for. Some card issuers will be willing to do this because they’re not taking on additional risk by simply moving some of your existing credit lines to a new credit card. That said, your credit line on a different credit card will be cut short as it’s used on another credit card.

That said, if you ask the card issuer to reconsider your credit card application and the reconsideration is unsuccessful, you shouldn’t rush to apply for another credit. Submitting too many credit applications within a short period of time will make it very difficult to be approved for a credit card. Instead, you should focus on improving your credit score by paying down your account balances, making your payments on time, and keeping old accounts open and in good standing.

After you’ve improved your credit for three to six months, you should only then submit a credit card application for a credit card that you’re reasonably likely to be approved for. Check the requirements for the credit card you want to apply for before applying. If your credit score falls within the card issuer’s requirements, submit an application, but if the card requires a higher credit score than yours, you should refrain from applying. This saves you from an unnecessary hard inquiry from being added to your credit report.

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

Merely getting denied for a credit card will not hurt your credit score as no negative information is added to your credit report for being denied. However, whenever you apply for a credit card, a hard inquiry is added to your credit report regardless of whether you’re approved or denied for the credit card. That said, a hard inquiry will only lower your credit score by only a few points (3 to 5 points). The impact a hard inquiry has on your credit score will lessen as the hard inquiry ages. Experts agree that a hard inquiry only impacts your credit score for 12 months, and after 2 years, hard inquiries are removed from your credit report automatically. If a hard inquiry remains on your credit report for more than 2 years, you can file a dispute with the credit reporting bureau showing the hard inquiry to have it permanently removed from your report.

How To Improve Your Credit Score Before Applying For Another Credit Card?

There are a number of things that you can do to improve your credit score before applying for another credit card, here are some of those things:

1. Payments – Make your credit card and loan payments on time. Your payment history has the biggest impact on your credit score because it accounts for 35% of your credit score. So, making your payments on time will help you maintain and improve your credit score. Missing even a single payment can cause a significant drop in your credit score. You can ensure that your monthly payments are made on time by setting payment reminders and automatic payments.

2. Account Balances – Reducing the balances (amount owed) on your credit cards, student loans, personal loans, and other types of debt will improve your credit score. This is so because your credit utilization accounts for 30% of your credit score, so paying down your balances will boost your credit score.

3. Credit Applications – If you want to improve your credit score to qualify for a credit card in the future, you should refrain from submitting too many credit applications within a short period of time. Hard inquiries account for 10% of your credit score, so reducing credit applications will improve your credit score. Also, lenders do not like to see that you’ve been applying for too many credit cards or loans as it indicates that you’re actively seeking credit. So, keep credit card and loan applications to a minimum. As a rule of thumb, you should have no more than 2 to 3 hard inquiries on your credit report for the best chances of being approved.

4. Old Accounts – You should keep old accounts that are in good standing open because they have a positive impact on your credit score. Even if you rarely use your old account, keep it open for the best impact to your credit score.

5. Credit Report – You should frequently review your credit report. Periodically reviewing your credit report can uncover hidden negative items on your credit report. It is not uncommon to find negative information impacting your credit, such as a collection account that you had no idea about. So, check your credit report and address any negative items on your credit report.

Bottom Line – What Happens If You Get Denied For a Credit Card?

If you get denied a credit card or your credit card application is not approved, no negative information will be reported on your credit report. However, a hard inquiry is placed on your credit report regardless of whether you’re approved or denied for the credit card. That said, you should space out credit card applications for the best chances of being approved.