Does getting denied for a credit card hurt credit score

It’s never a good feeling being denied credit from a lender. However, a refusal is not a deciding factor for credit agencies in reducing your credit score, and there are ways to safeguard against devaluation when applying for credit cards.

Your credit score is an indication of your financial reputation, and showcases to credit card issuers how reliable you are with your finances, and how risky you could be as a customer. As a credit card can be misused to accrue debt, card issuers want to ensure they’re not putting at-risk customers in bad financial positions.

Credit denials, and approvals for that matter, have no direct impact on your credit score. All applications are recorded on your credit report, and it’s these repeated inquiries which can have a determining impact on your credit score.

When you apply for new credit, a lender will typically perform a credit check. This will likely involve a hard inquiry into your credit history, in which the lender pulls your credit report from one of the three primary reporting agencies - Equifax, Experian and illion.

Making multiple credit applications at once can make you appear ‘credit hungry’ to a lender, so they may be less likely to approve your application. Having multiple credit applications rejected may hurt your credit score and your chances of approval for future products. Therefore, it’s practical to leave a sensible amount of time - at least three months - between applications in order to diminish the risk of being penalised.

Why was your application knocked back?

There are a number of reasons a lender may reject an application for credit:

• Age: You must be 18 years or older to apply
• Citizenship: You must be an Australian citizen or permanent resident
• Income: You must meet certain minimum remuneration requirements
• Occupation: You must retain steady employment
• Assets: You must own some assets, such as a home, vehicle or investments
• Spending: Your expenditure should not exceed your income
• Insolvency: You must not be bankrupt or have defaults
• Credit score: Possessing good credit is advantageous

Negative events in your credit history may work to reduce your credit score, but they do not last forever. This is how long adverse events may stay on your credit history:

• Repayment history - 2 years
• Credit enquiries and applications - 5 years
• Writs, summons and court judgements - 5 years
• Payment defaults - 5 years
• Bankruptcies, debt agreements and personal insolvency agreements - 7 years

Checking your credit score for free

Generally, most people’s credit scores are between 300 and 850. The higher the score, the more agreeable your credit rating is. A good score is one above 621, according to Equifax. Learning your credit score could assist in negotiating financing and may encourage you to improve your rating.

If you’re seeking an efficient and safe way to discover your credit score for free, consider signing up for RateCity’s credit score check. Simply fill out a short form that takes just 60 seconds to complete. You’ll get both your credit scores from two of the world’s largest credit reporting agencies, Equifax and Experian.

Checking your own score isn’t the same as a credit check by a bank, and won’t hurt your credit score.

To find out more about how your credit score can affect your chances of being approved for a line of credit, and to discover handy ways to increase your score, see our helpful explainer.

Improving your credit score

The simplest way to boost your credit score is to ensure that you make credit repayments on time. Fulfilling these obligations will positively impact your performance history. For example, skipping out on your home loan payments and maxing out credit cards can lead to a significant reduction in your overall credit score.

Paying down outstanding loans and maintaining consistently low credit card balances may also assist in strengthening your credit score. The less credit applications you make, successful or not, can also be useful in sustaining a good score.

Reviewing your credit history to ensure that there are no errors, such as a family member’s information incorrectly added to your file, can also be productive. You may be surprised to learn what events have been recorded that you may not be aware of, such as a late payment for a utilities bill shared with a partner.

It may take several months to get your financial situation back on track, so be realistic about your timeline and goals.