Does Being Denied Credit Hurt Your Credit Score?

Does Being Denied Credit Hurt Your Credit Score?

Written by Caitlin Wood
Last Updated May 5, 2022

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.

Rating of 5/5 based on 15 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. 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. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Save With Loans Canada

Special Offers

50 Free Trades Offer

50 Free Trades Offer
Ends August 31st, 2022

Almost $500 in commission-free trades. Code “50TRADESFREE”. Conditions apply.

View Offer
Borrow Today, Don’t Pay Till July

Borrow Today, Don’t Pay Till July
Limited Time

Borrow $500-$50,000 from Fairstone by May 31 and don’t pay until July.

View Offer
Build Credit With Refresh

Build Credit With Refresh

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $7/Month

Build Credit For $7/Month

With KOHO’s prepaid card you can build a better credit score for just $7/month.

View Offer
Industry Spotlight

What's happening with Canada's credit industry?

addy ⎯ Making Real Estate Accessible To All Canadians

addy ⎯ Making Real Estate Accessible To All Canadians

Check out our interview with addy; a platform that allows Canadians to invest in different properties across Canada with as little as $1.

Read Post
Find The Best Rate
In Your Region
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.