Will My Credit Score Go Down If I Am Denied a Credit Card?

According to credit bureau Experian, being denied a credit card will not cause your credit score to go down because you were rejected. The reason is that your credit report does not provide details on whether or not any application has been declined or approved. Since the credit bureaus do not know, a decline does not create an impact on a credit score. 

Applying for the card does create a hard inquiry though. Such an inquiry demonstrates that you applied to obtain more debt even though the available credit or debt does not yet show up on your personal credit report. The fact that no new account appears on your report does not mean your application was denied. It alternatively could mean that you decided not to accept the credit account or loan. 

Applying for a credit card (whether it is accepted or rejected) does harm your credit score in the 10 percent component for new credit inquiries. This results from the bureaus understanding that possible new debt creates potential credit risk. The good news is that such an effect is usually quite small. It will decline in importance with time too. 

Remember that timely payment history on approved accounts (at a 35 percent of credit score component) is the most important element in your credit scoring. 

To put this into perspective, this payment history outweighs the impact of new credit inquiries by three and one half times. 

Does Opening a New Credit Card Hurt My Credit Score?

The answer to this question depends on four factors. If you are opening your first credit card, a new card account could improve your credit score. Without a credit card it is possible that you do not even possess a credit score. After six months of this new account, enough information will exist for the credit score calculation to create a score for you.

For other scenarios, opening a new card can hurt your score some. It creates a hard inquiry that shows up on your credit report when you apply. This remains whether or not you accept the card or receive approval for it.

Since these types of inquiries are a 10 percent component of your credit score, every subsequent hard inquiry could mean the loss of several points on your credit score. This could be the difference between a good and bad credit score (translating to a good interest rate and a mediocre one on a loan).

Another factor with a new card is that new credit cards reduce the age of your average credit. Another 15 percent of your score component comes from the age of your credit (measuring your experience in managing credit). All else being equal the greater your credit experience, the higher your score will be.

Two elements make up your credit age component. It measures the age of your original account as well as your average length of history for all accounts. The longer it has been since you opened your last account, the more this will reduce the average age for your credit accounts. 

The last factor has to do with credit utilization, which makes up 30 percent of your credit score. If you do not make major purchases on your new credit card, then your credit utilization ratio will drop and so improve your score. Should you open a new account and immediately run up the balance, then your credit utilization may increase enough to cause a substantial hit.

You should seek to keep this credit utilization number below 30 percent (and even better under 10 percent) as much as possible. The more of your new credit limit you are utilizing, the worse the impact on your credit score will be. 

How Do I Compare Credit Cards?

Nowadays online sites like Nerd Wallet and Wallet Hub provide you with free credit card offer comparisons screening tools. These permit you to line up the various credit cards that are most relevant to you so that you can compare them by interest rates, rewards, cash back, balance transfer offers, business features, bad credit, and more. 

These handy online apps allow you to apply specific filters in their comparison tools. After you have checked the features that are most important to you, they will return a list of credit cards that match your specified profile. Comparing credit cards like this before you apply for them will save too many hard hits on your credit reports that could damage your credit score.

Other sites like Credit Karma actually ask you a series of questions (four with Credit Karma) and then reveal the best cards in each category. They tell you to think about your credit (know your credit score and be realistic) and then determine if you will carry a balance or pay off the charges every month. You have to tell them if you want to transfer a balance. Finally they ask if you are more interested in travel rewards or cash back programs.

Credit Karma then reveals to you the best cards for your situation.

How Do I Increase My Credit Limit?

It can be beneficial to increase your credit limit if you are financially stable. If you are able to pay your credit card bills on time and in full each month, then expanding your credit limit will improve your credit scores as it reduces your credit utilization ratio (the second most important FICO score component at 30 percent).

A higher credit limit will also increase your financial flexibility. Increasing your limit can be a bad thing if you struggle with overspending tendencies. 

There are four ways to grow your credit limit.

  • You can go to the credit card company website to make an online request. A great number of the issuers have this feature built into their website. After signing in, you should see a menu option to make an increase request. The creditor may ask you to provide updated information on your income. If you can show a higher income, this demonstrates better financial security. Many credit issuers will consider this as they review your credit line increase request. 
  • Another way to request an increase is by calling the creditor. Their number is listed on the back of your credit card. Start by querying the customer service representative if you are eligible for a credit line increase. They will likely ask if your income has increased as well as why you want the higher limit.
  • You could also wait for automatic credit line increases. Many creditors provide these periodically after you have used the card responsibly for six months or a year. 
  • Finally, you can always apply for a new credit card. You are more likely to receive this if you have been timely in your payments on your existing credit cards. The same creditor may be willing to offer you another card that possesses a higher limit in lieu of the original one. Otherwise, you may simply receive a second credit card. Either way, you will have a higher overall available credit limit than you did before. 
How Do I Get Credit When No One Wants to Give it to Me?

It is not easy to get credit for the first time. The catch 22 is that you can not get credit because you do not have any yet. The majority of creditors want you to have credit before they will extend you any. 

The best way around this is to seek out a credit card whose target audience is people who do not yet have credit. For those of you with a savings or checking account, you can ask your bank about a credit offer for customers with limited credit histories. Many banks offer customers student credit cards, credit builder loans, or secured credit cards. 

To get a student credit card in your own name, you must be at least 18 years old. 

Applying for a secured credit card is another easier way to get started with first time credit. These cards typically require that you make a deposit against the credit limit on your new card. In this way, it works almost like a debit card. The good thing about some of these secured card offers is that they will automatically convert to non secured credit cards after you have a proven timely payment history of from 12 to 18 months with them. 

Another option is to apply for a gas credit card or retail store card. These are usually easier to qualify for as a first time credit applicant. After you build up several months of positive credit history with either of these types, it will be simpler to be qualified for one of the major branded credit cards such as Mastercard or Visa. 

The downside to gas and retail cards is that they come with higher costs. The interest rates will be higher on both types than they are with typical Visa or Mastercards. This is the trade off for building up credit with these gas and retail cards. So long as you pay off all of your balance every month, you will not incur any finance charges. This discipline will serve you well when you get your major brand credit cards.