Does Credit Card Rejection Affect Your Credit Score?

Podcast Show by Radhe Shyam

Does Credit Card Rejection Affect Your Credit Score?

Credit card rejection can be a frustrating experience, but it's important to understand how it can impact your credit score. While the rejection itself doesn't directly affect your credit score, the process of applying for a credit card can have an impact. When you apply for a credit card, the issuer will typically check your credit report, resulting in what's called a "hard inquiry."

Yes, credit card rejection can affect your credit score, but not in the way you might think. Here are some key points to keep in mind:

1. A hard inquiry on credit report: When you apply for a credit card, the card issuer will typically check your credit history and score to decide whether to approve or reject your application. This process is called a hard inquiry or hard pull.
2. Lower overall credit limit: If you're rejected for a credit card, it could also mean you have a lower overall credit limit, which can affect your credit utilization ratio and your credit score.
3. Opportunity cost: If you're rejected for a credit card, it means you won't have access to any rewards, cashback, or other benefits that come with the card. This opportunity cost won't directly affect your credit score, but it could still impact your overall financial situation.
4. Increase in credit utilization ratio: Your credit utilization ratio is the percentage of your available credit that you're using. If you're rejected for a credit card, it means you won't have access to the credit limit that comes with the card, which could increase your credit utilization ratio if you have balances on other cards or loans.

In summary, while credit card rejection does not directly impact your credit score, it can indirectly affect it by signalling to lenders that you may be a risky borrower. It is important to manage your credit carefully and take steps to improve your credit score if needed.

For more information refer to: https://cardinsider.com/blog/does-credit-card-rejection-affect-your-credit-score/