Does a Rejected Credit Card Application Affect Credit Score?

The short answer: NO!

Your credit score has ALREADY been affected, by the credit APPLICATION, not the rejection.

How does being rejected for a credit card affect credit score?

In Australia, one of the key components while calculating your credit score, is number of credit enquiries.

When you apply for a credit card, a credit enquiry will be send to credit reporting agencies such as Experian, Equifax and illion, at the time of credit application.

Whether or not you are approved, the credit enquiry generated at time of application will tank your credit score by a bit. However, it usually recovers in 3 to 6 months of time.

Frequent Credit Enquiry is BAD

Generally, you don’t need to worry about credit score being affected by rejected credit card application. That is, unless you do it frequently.

Think about this, a friend came to you to borrow money. And you were told by others that he had already asked to borrow from them last week. How comfortable do you feel about lending to this friend?

It’s the same story with frequent credit card application. Frequent credit enquiry in a short period of time is an indication to credit lenders that this person is hungry for credit, and therefore a risky customer.

From personally experience, one application every 3~4 months will leave you with a decent credit score. That’s 3~4 enquiries a year. Also, STOP applying 12 months prior to a mortgage application.

How do I know? I applied and was declined for a NAB Rewards credit card in December 2018. I called NAB credit team for reconsideration, and was told specifically, even though the last enquiry 3 months apart in September, the rejection was due to having 8 Credit Enquiries in the past 6 months. I was told to try again in 6 months, and they don’t want to see any credit enquiry in the 6 months period.

Credit Score is NOT everything

Good credit score doesn’t guarantee approval, and vice versa.

This is because the approval criteria is different with each credit lenders, and credit score is only a small portion of the decision making process.

What IS important, is that making sure that you’re financially responsible. E.g. Paying off card balances in full, on time, every time. Paying all bills on time, etc.

Comprehensive Credit Reporting ensures that all the good credit event is included in your credit report! Compare to prior era when only bad credit events were reported, the lender will have more information about you to make a decision. Financially responsible people are better better understood by comprehensive credit reporting. Hence the credit score is becoming even less important.

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