Can a credit card decline hurt your credit score?

It’s never nice to be denied credit from a lender. However, a denial is not a deciding factor for credit agencies in lowering your credit score, and there are ways to protect against devaluation when applying for credit cards.

Your credit score is an indication of your financial reputation and shows credit card issuers how reliable you are with your finances and how risky you might be as a customer. Because a credit card can be misused to accumulate debt, card issuers want to make sure they don’t put risky customers in a bad financial situation.

Credit rejections and approvals from elsewhere have no direct impact on your credit score. All inquiries are recorded on your credit file, and it is these repeated requests which can have a decisive impact on your credit score.

When you apply for new credit, a lender will usually perform a credit check. This will likely involve a thorough investigation of your credit history, in which the lender pulls your credit report from one of three major reporting agencies – Equifax, Experian and illion.

Applying for more than one credit at a time can make you feel “credit-hungry” for a lender, so they’re less likely to approve your application. Rejecting multiple credit applications can hurt your credit score and your chances of being approved for future products. Therefore, it is practical to leave a reasonable period of time – at least three months – between requests in order to reduce the risk of being penalized.

Why was your application rejected?

There are several reasons why a lender may reject a credit application:

  • Age: You must be 18 or older to apply
  • Citizenship: You must be an Australian citizen or permanent resident
  • Income: You must meet certain minimum earnings requirements
  • Occupation: You must maintain a stable job
  • Assets: You must own certain assets, such as a home, vehicle, or investments
  • Expenses: your expenses should not exceed your income
  • Insolvency: you must not be bankrupt or have payment defaults
  • Credit score: Having good credit is advantageous

Negative events in your credit history can help lower your credit score, but they don’t last forever. This is how long adverse events can stay on your credit report:

  • Repayment history – 2 years
  • Credit applications and applications – 5 years
  • Writs, summonses and judgments – 5 years
  • Defaults – 5 years
  • Bankruptcies, debt agreements and personal insolvency agreements – 7 years

Free credit score check

Generally, most people’s credit score is between 300 and 850. The higher the score, the more acceptable your credit score. A good score is above 621, according to Equifax. Learn your credit score could help you negotiate financing and encourage you to improve your rating.

If you’re looking for an effective and safe way to find out your credit score for free, consider signing up for RateCity Credit Rating Check. Simply fill out a short form that only takes 60 seconds to complete. You’ll get your credit scores from two of the world’s largest credit reporting agencies, Equifax and Experian.

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

To learn more about how your credit score can affect your chances of being approved for a line of credit and to find practical ways to increase your score, check out our useful explanatory.

Improve your credit score

The easiest way to boost your credit score is to make sure you pay off your credit on time. Meeting these obligations will have a positive impact on your performance history. For example, skipping your home loan payments and maxing out credit cards can lead to a significant reduction in your overall credit score.

Paying off outstanding loans and keeping credit card balances consistently low can also help boost your credit score. The fewer successful or unsuccessful credit applications you make can also be helpful in maintaining a good score.

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

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