TPG credit card question: How bad is it to get denied for a credit card?

Jul 5, 2021

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Editor’s note: This post has been updated with new information.


These days the fastest way to accumulate a meaningful amount of points and miles is by opening new travel rewards credit cards to earn the sign-up bonuses they offer. I promise, if you keep at this long enough, you’ll eventually get rejected on a credit card application. So the question is: Are there any long-term ramifications if you get declined for a credit card?

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This is an interesting question, as it’s important to have a thorough understanding of the factors that affect your credit score before you start applying for credit cards. Any time you apply for a new line of credit, whether it’s a mortgage, car loan or credit card, the company will pull your credit report.

These “hard inquiries” usually ding your credit score by about five points, and overall your new credit history accounts for about 10% of your FICO score. These types of credit pulls differ from “soft inquiries,” which might happen when you open a new bank account or get your credit screened to sign a rental agreement. In a soft inquiry, the other party looks at your credit report but the inquiry doesn’t then affect your credit score.

Related: What is the difference between a hard and soft pull on your credit report?

(Photo courtesy of myFICO)

 

These inquiries fall off your credit report after about two years, though the temporary score drop usually rebounds before then. In most cases you’ll receive a hard credit pull whether you’re approved for a card or rejected, although American Express has been known not to hard pull existing customers when it declines them for a new card.

In this sense, the negative impact of applying for a new credit card is the same whether you get approved or rejected. Obviously if you get approved you get a new account and an increased credit limit which can help boost your credit score long term (not to mention a nice welcome bonus), but there aren’t any uniquely negative effects of being rejected. In over three years of collecting points and miles, I’ve been rejected for 12 different credit cards, and still have a credit score of about 780.

Related: 5 ways to improve your credit score

Study each issuer’s application rules

While you shouldn’t worry too much if your application gets rejected, you shouldn’t just apply sporadically without understanding the unique rules of each different card issuer. We’re talking specifically about his Chase 5/24 status and applying for Chase cards, since the issuer will automatically reject you if you’ve opened five or more credit cards in the last 24 months (except certain business credit cards). Even if you don’t know your Chase 5/24 status off the top of your head, it’s worth taking some time to sit down and figure it out instead of just applying randomly and hoping for the best.

The same goes for other issuers such as Amex, which limits you to only getting the welcome bonus on each of its credit cards once per lifetime. You also have to be careful, as some issuers are especially sensitive to recent inquiries. Even if they don’t have any formal rules like Chase’s 5/24, Citi and Capital One have both been known to reject applicants with otherwise excellent credit for having too many recent inquiries on their credit report.

Related: The ultimate guide to credit card application restrictions

Bottom line

Getting rejected for a credit card is unfortunate, but thankfully there’s no permanent harm to your credit score. The five-point hit to your credit score and the inquiry itself will both fade over time, meaning you shouldn’t balk at applying out of fear of damaging your score for the long term. Still, you should make sure you know the rules of your issuer before applying. There’s no good reason to waste a credit inquiry on a card you have absolutely no chance of getting, like applying for a Chase card when you’re over 5/24.

If you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Featured photo by karen roach/Shutterstock.

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