Does it Hurt My Credit Score if I’m Denied Credit?

When you apply for a loan or credit card, the credit grantor reviews your credit report and score usually through an automated underwriting system. A credit inquiry is placed on your credit report, which indicates that a company has reviewed your file.  The credit inquiry includes the company name and date of the inquiry.  The inquiry does not indicate whether your application was approved or whether you were denied credit.

Do you have a credit inquiry on your credit report? Visit here to see your credit report and credit score online now

One thought would be to attempt to match a newly opened account with a recent credit inquiry as a rudimentary method of determining whether or not the inquiry lead to you being approved or denied credit.  However, it’s unlikely lenders would try to match the credit inquiry with an account.  The fact that an account wasn’t opened doesn’t necessarily indicate that you were denied credit; you may have decided not to accept the credit card or loan.  And, the lender may choose not to report their accounts to the credit bureaus.

Inquiries for credit in the past 12 months can impact your score.  To handle shopping for a mortgage, auto loan or student loan, inquiries of these types within the last 30 days are not counted.  Prior to that, mortgage and auto inquiries within each 45 day period are combined as one credit inquiry.  It is best to do your credit shopping within 30 days.  Applications for other loans or credit cards do not enjoy the same treatment.

That fact that you were denied credit does not hurt your score, but the credit inquiry could have an impact depending upon its type. Too many inquiries in a short period of time will have more of an impact than isolated inquiries. By law, you are to receive a written explanation of why you were declined credit and where to get a copy of the information that was used.  If it was a credit reporting agency, you would be given the name, address and phone number.  And, after July 21, 2011 the denial must be accompanied by the same credit score used by the lender to make their decision.

Do you have a credit inquiry on your credit report? Visit here to see your credit report and credit score online now

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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