Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score

When you need a credit product like a credit card, personal loan or mortgage, you’ll need to fill out an application. Depending on your finances and credit profile, the lender or creditor will either approve or reject you. Unfortunately, when you’re faced with a rejection, you may wonder if a denial will affect your credit scores. 

Does Being Denied Credit Affect Your Credit Scores? 

The simple answer is no, being denied for credit or a loan will not hurt your credit scores. In fact, although your credit report shows that you made an application, it doesn’t show whether your application was approved or denied. Anyone making an inquiry has no way of retrieving that information. However,  if a hard inquiry was made when you applied for credit, your credit may be affected negatively regardless if you were approved or rejected.

What Is A Hard Inquiry?

When you apply for a credit product, your lender will typically perform a credit inquiry. The company may conduct a hard inquiry to determine your creditworthiness and your likelihood to make your monthly payments. Depending on whether they perform a hard or soft inquiry, it could impact your credit scores.

  • Hard Inquires – Hard inquiries are inquiries made by companies when you apply for credit products like a credit card, car loan, mortgage or personal loan. These inquiries can negatively impact your credit scores. 
  • Soft Inquires – Soft inquiries are the inquiries that you make when you request a copy of your own credit report. Soft inquiries have absolutely no impact on your credit scores.

How Do Inquiries Impact My Credit Scores?

Your credit scores keeps track of the number of recent inquiries, and how close together they are. Each new inquiry may knock your credit scores down by a few points. This is because it shows that you’re applying to take on new debt. However, the impact is generally very small and disappears over the course of a few months.

Multiple Hard Inquiries

However, having a lot of inquiries within a short period of time could have a larger impact. If you’re applying to take on new debt in a lot of places at the same time, it could make you look like a credit risk. For that reason, it’s best to space out your credit applications by at least two months.

There are exceptions to this, particularly for mortgages and car loans. Multiple credit inquiries within a short period of time for these loans are considered as a single inquiry. 

Overall, don’t worry too much about the inquiries though. As long as you space them out, they will have a minimal impact, and they do disappear over time

Can Potential New Creditors Tell If An Application Was Denied?

If you are denied credit, other potential creditors who check your credit will have no way of finding out. They will only be able to see the hard inquiries on your report which would show that you applied for credit, and when you applied for it. The inquiry may also include the name of the company that you applied credit with. It does not include information about whether they approved the application.

Even when no new account shows up on your credit report, it won’t indicate to them that you weren’t approved. You could just as easily have chosen not to open an account, or the lender might not report to the credit reporting agencies. 

What Can You Do If You’re Rejected?

If you’ve been rejected for a loan, there are a few things you can do before applying for another. 

  1. Find Out Why You Were Rejected – Understanding why you got rejected is one of the most important things you can do, as it can help you get approved for the next time you apply for a loan. 
  2. Work On Improving The Things You Were Rejected For – Once you know the reason for your rejection, you can work on improving it.  For example, if you lender tells you you were rejected due to a low credit score or a high debt-to-credit ratio, then you can use that information to improve those aspects of your finances. 
  3. Re-Apply For Credit – Once you’ve improved your credit and finances, you can re-apply for your loan knowing that your chances of approval are much higher. 

FAQs On Being Rejected For Credit

Can I find out If I approve for credit without hurting my credit? 

The best you can check if you’ll qualify for a credit product is by checking your own credit and seeing if you meet the lender’s minimum requirements. Many lenders also provide free loan quotes or pre-approvals, so you’ll know how much you’ll qualify for before formally applying. 

If being approved affects your credit score why doesn’t being denied?

The simple act of being approved for credit doesn’t affect your credit score. The approval or denial isn’t what impacts the score. If you’re approved, what actually impacts your score isn’t the fact that you received credit, it’s how well you manage the new debt and meet your monthly obligations.

What was aI rejected for a loan? 

There are a number of reasons your application can be denied, from mistakes on your application to low credit scores to poor overall finances. 

The Bottom Line

Being denied for credit has absolutely no effect on your credit report. However, if you’re denied, you should keep in mind that there was probably a reason why you didn’t get approved. You should take a deeper look into your financial situation and debt load and start thinking about what you can do to improve your credit score so you can turn those denials into approvals.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2023/09/GlobeMailTopCompanies2023-1.png
Loans Canada places No. 228 on The Globe and Mail’s fifth-annual ranking of Canada’s Top Growing Companies.

By Caitlin Wood, BA
Published on September 29, 2023

Loans Canada is excited to announce it has made it onto the Globe and Mail’s Top Growing Companies list for the second year in a row.

https://loanscanada.ca/wp-content/uploads/2023/09/Finder-Awards.png
Finder Awards Finalists: Personal Loans Customer Satisfaction Awards 2023

By Priyanka Correia, BComm

Loans Canada is happy to announce it received the finalist award in the Best Personal Loan Search Platform category.

https://loanscanada.ca/wp-content/uploads/2016/12/caution-1.jpg
Beware of Fraudulent Lenders Impersonating Loans Canada

By Caitlin Wood, BA

A note to our clients about fraudulent lending practices and illegal upfront fees.

https://loanscanada.ca/wp-content/uploads/2021/04/T1213.png
The T1213 Form Explained

By Corrina Murdoch

The names of specific tax forms in Canada can be confusing, like the T1213 tax form. What is it and do you need to file this year?

https://loanscanada.ca/wp-content/uploads/2022/03/How-To-File-A-Notice-Of-Objection-To-Dispute-Your-Tax-Return.png
Filing A Notice Of Objection To Dispute A Tax Return

By Corrina Murdoch

Do you disagree with your notice of assessment? Find out how to file a CRA notice of objection and have the issue resolved.

https://loanscanada.ca/wp-content/uploads/2022/01/Notice-Of-Assessment.png
What Is A Notice Of Assessment?

By Corrina Murdoch

A Notice of Assessment is the government’s evaluation of your income tax return. After you file your taxes each year, the CRA sends you an NOA.

https://loanscanada.ca/wp-content/uploads/2024/03/Canada-tax-reviews.png
Canada Tax Reviews

By Lisa Rennie

Wondering if you have any unclaimed cash with the CRA? Canada Tax Reviews can help you recover unclaimed tax credits from previous years.

https://loanscanada.ca/wp-content/uploads/2024/03/Nyble-vs-bree.png
Nyble vs. Bree: Which One Is Better?

By Lisa Rennie

Bree and Nyble make great alternatives to expensive payday loans. If you're short on cash, these services can help cover you.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card