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Denied Credit

Do Rejected Credit Applications Affect Your Credit Scores?

Getting rejected for a loan or credit card doesn't impact your credit scores. However, creditors may review your credit report when you apply, and the resulting hard inquiry could hurt your scores a little. Learn how to wisely manage your next application and avoid unnecessary hard inquiries.

Does Denied Credit Show Up on Your Credit Report?

Your credit report doesn't say whether your applications were approved or denied. But it could contain hard inquiries—records of when creditors reviewed your credit reports while making lending decisions.

For example, you might apply and get approved for a handful of auto loans when shopping for a car, but you'll only take the loan with the best rate and terms. Or, you might apply for a loan and then change your mind after reviewing the lender's offer. In either case, the hard inquiries didn't lead to new accounts even though you were approved.

Also, a hard inquiry only appears on the credit report the creditor checked. Creditors may check your credit reports from one or more of the major credit bureaus (Experian, TransUnion and Equifax). If the creditor only reviews your Experian credit report, the inquiry would be on your Experian report but not your Equifax or TransUnion credit reports.

How Does a Hard Inquiry Affect Your Credit?

Hard inquiries remain on your credit report for up to two years and could have a minor negative impact on your credit scores. The impact often decreases over time, and generally doesn't last more than a few months. But you might experience larger score drops if you're new to credit or have multiple hard inquiries during a short period.

While each new application you submit could lead to another hard inquiry, you can (and should) shop for loans from different lenders to try to get the best rate. Recognizing that this is savvy rather than risky behavior, credit scoring models typically consider multiple hard inquiries as one inquiry if they are for the same type of loan and occur within a specific rate-shopping window.

For example, FICO will "deduplicate" (or treat as one inquiry) student loan, auto loan and mortgage hard inquiries that occur within a 14- to 45-day window (depending on the type of FICO® Score* ). FICO® Scores also won't consider hard inquiries from these types of loan applications that occurred within the last 30 days.

VantageScore®, another credit scoring company, uses a 14-day shopping window and slightly different rules. It deduplicates hard inquiries on a wider range of account types, including credit cards and personal loans, but doesn't have the 30-day buffer period.

Also, know that a credit check could lead to a soft inquiry rather than a hard inquiry, and these never impact your credit scores. Soft inquiries can occur when someone checks your credit for a reason other than approving or denying a credit application, such as when you check your own reports or apply for a prequalification or preapproval.

What to Do After Being Rejected for Credit

Getting rejected is never fun, but you can take steps to avoid denials and improve your chances next time.

First, try to find out why your application was denied. It could have been due to many factors, including your credit score, credit history, income or employment status. Or, some creditors may have unique rules that lead to the denial.

For example, Chase's 5/24 rule means your Chase personal credit card application will likely be denied if you opened five credit cards (including non-Chase cards) in the previous 24 months. You could have a high income and excellent credit, and still get denied due to the rule.

Depending on the reason, you may want to try applying for a loan or credit card from a different issuer. Or, if you continue to hit roadblocks, you may want to take a step back and focus on improving your credit and paying off debt first. While some creditors offer loans for people with bad credit, the loans tend to have high interest rates and fees, and may be best left as an emergency option.

You Can Find a Credit Card Without Impacting Your Credit

If you've gotten rejected, know that hard inquiries often only have a minor impact on credit scores and the denial won't appear in your credit reports. To avoid unnecessary additional hard inquiries and denials, during your next round of applications, start with creditors that offer preapprovals or prequalifications with a soft inquiry.

With Experian CreditMatchTM, you can get personalized credit card and personal loan offers based on a soft inquiry of your Experian credit report. And if you're curious about your credit history, you can also sign up for your free Experian credit report.

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