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You'll know your credit application has been denied when you receive a formal notice from the credit issuer. The rejection might come instantly as an online response, or you may have to wait a week or longer to be notified.
Your application could be rejected based on something in your application, and you may find that out immediately. It could also be because of your credit score or information in your credit report, which the credit issuer will likely review as part of the approval process.
If your application is rejected because of information from your credit report, you will get a notice—written, oral or electronic. This notice will explain which credit report the credit issuer viewed, why you didn't get the credit product you applied for and your rights as a consumer.
Does Getting Denied Credit Hurt Your Credit Score?
A credit denial doesn't hurt your credit, but the hard inquiry associated with any credit application could temporarily ding your credit score. That is true whether your application is approved or denied.
Some credit issuers can prequalify or preapprove you for credit using a soft inquiry that doesn't affect your credit. Based on the results of prequalification or preapproval, you can decide whether you want to actually apply.
How Do You Improve Your Chances of Getting Approved for Credit?
Before you apply for credit, it's important to understand what a credit issuer may be looking for in an applicant. The best cash back card out there may require a high income and excellent credit. If you don't fit that criteria, you'd be smart to instead apply for the best cash back card you can qualify for now.
Since submitting credit applications can lower your credit score a bit regardless of approval, getting rejected means a dinged credit score and will leave you still needing credit. That's a double whammy you can avoid.
Many credit card issuers offer a variety of cards, aimed at different kinds of customers, and you may also be able to find out your odds of acceptance before you apply.
Experian offers free access to your credit report and score, which can help you understand which credit products are within reach. You can also be matched directly with suitable credit cards using Experian CreditMatch™.
What Is an Adverse Action Letter?
An adverse action letter is designed to help you understand why you were denied the credit you applied for. If you already know the answer was no, resist the temptation to throw it away unread. Think of it as your roadmap to getting approved next time.
By law, it must contain:
- The name of the credit reporting agency that supplied the report, along with its phone number and address.
- Reasons your credit application was denied (there can be up to five).
- Your credit score, if it was used during the approval process.
- A statement saying that the credit reporting agency did not make the decision to deny you credit and cannot explain it.
- Notice of your right to a free copy of your credit report if you request it within 60 days.
- Notice of your right to dispute inaccurate information in your credit report.
Once you know why your application was denied, you know which factors you need to focus on to improve your chances of being approved when you apply for credit again.
The Bottom Line
If you are denied credit, it's possible you'll get the bad news right away. Once you receive a decision, taking time to understand the outcome can help you get a different result next time. Continuing to apply, hoping you'll eventually get a yes, can actually damage your credit. Ideally, you'll take time to address the reason you were rejected.
Making sure that your credit history and score lines up with that of a credit card or lender's target customer can help you get approved. Experian's CreditMatch can help you find credit cards or personal loans that are likely to be a good fit for your credit standing, as well as give you approval odds, so you can make an informed decision about where to apply next time.