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Topics addressed on December 26, 2007:
Your credit report does not show that your application was declined
I need a credit card to establish credit history and improve my score. I've read that it can reduce your score to apply and be denied. Would it be better for me to try once or twice to get an unsecured credit card or store card and possibly be denied or should I just get a secured credit card and avoid a possible denial on my file?
A credit report only shows an inquiry that indicates you have applied for credit. It does not indicate whether an application has been approved or declined.
If a new account is added, businesses reviewing your report can assume your application was approved, although scoring models do not link the inquiry to the account in any way.
If a new account is not added to your report, that doesn’t mean your application was declined. It simply shows that for some reason a new account was not opened. It could be that you simply decided you didn’t want the account and withdrew your application.
Because your credit report does not indicate “approved” or “declined,” being declined has no impact on credit scores or lenders’ decisions.
Submitting a lot of applications in a short time can have a negative impact, though. The potential negative impact is not because of being declined; it is because it appears you are trying to accumulate a lot of debt quickly, which can be a sign of high lending risk.
It is better to apply for one or two credit cards or loans and then wait a few months before trying again if you do not qualify.
If you have never had credit, getting a secured credit card can be a good approach, especially if your lender reports your payment history to Experian.
In some cases lenders do not report payment history for secured credit cards. However, that doesn’t mean a secured credit card is not a good way to begin to establish credit.
Often, a lender will convert your secured account to a traditional credit card account after you have shown them that you will manage your debt well by using the secured account wisely and making all of your payments on time. Ask your lender about their policies.
The secured card can give you a foot in the door to eventually start building a positive credit history.
The only other alternatives you may have are to have someone cosign a loan application for you or allow you to be listed as an authorized user on their account.
Thanks for asking.
- The "Ask Experian" team