Does Loan Rejection Affect Credit Score?

Credit Score is primarily based on loan repayment history, how much of credit you use against the approved limit, how much of it is secured vs unsecured, how long have you been using credit etc. If you apply for too many loans in a very short time, then the credit bureau assumes you to be desparate looking for credit. This has a minor negative impact on your credit score (it may go down by a few points).

Credit Bureaus typically do not collect the reason why a loan application did not convert to loan. A borrower may have also found a source of money in his personal (outside banking) network. So it is also not very feasible for another banker to know why your previous loan application did not get converted to a loan.

You should keep checking your credit history on a regular basis, ideally once every quarter.

Your credit score is a three-digit number that relates to how likely you are to repay debt. Banks and lenders use it to decide whether they’ll approve you for a credit card or loan. It keeps track of the number of recent inquiries, and how close together they are. Each new inquiry in a short period of time can knock your credit score down by a few points. This is because it shows that you’re applying to take on new debt. However, the impact is very small and disappears over the course of a few months.

Credit score generally does not get affected in case you get rejected in taking a loan.

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.

CEO of CreditKarma.com, Kenneth Lin says that the organizations do not look at whether or not you were approved or denied.

Yes, applying for a loan can get hard as the inquiry would surely increase which can ultimately hurt your credit score. So, if you are denied for a loan you really need to be careful since not getting funding means you are likely to apply for another loan and subsequently generate another hard inquiry.

Thus 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.

Also Read- How do I improve my credit score?

Your credit score is a three-digit number that relates to how likely you are to repay debt. Banks and lenders use it to decide whether they’ll approve you for a credit card or loan. It keeps track of the number of recent inquiries, and how close together they are. Each new inquiry in a short period of time can knock your credit score down by a few points. This is because it shows that you’re applying to take on new debt. However, the impact is very small and disappears over the course of a few months.

Credit score generally does not get affected in case you get rejected in taking a loan.

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.

CEO of CreditKarma.com, Kenneth Lin says that the organizations do not look at whether or not you were approved or denied.

Yes, applying for a loan can get hard as the inquiry would surely increase which can ultimately hurt your credit score. So, if you are denied for a loan you really need to be careful since not getting funding means you are likely to apply for another loan and subsequently generate another hard inquiry.

Thus 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.