Does Cancelling a Credit Card Application Affect Your Credit Score?

How Cancelling a Credit Card Application Can Affect Your Credit Score

It might seem like cancelling a credit card application would harm your credit, but the act of cancellation itself doesn't directly impact your score. The real effect comes from the initial application process.

1. Application Submission: The process begins when you submit your application. By doing so, you authorize the credit card issuer to review your credit history to determine your eligibility.
2. The Hard Inquiry: To assess your creditworthiness, the lender performs a "hard inquiry" or "hard pull" on your credit report. This happens almost instantly after you apply.
3. Initial Score Impact: A hard inquiry is recorded on your credit report and typically causes a small, temporary dip in your credit score by a few points.
4. The Point of No Return: Even if you immediately contact the issuer to cancel, the hard inquiry has already been made. While you can withdraw the application, the inquiry cannot be removed from your report.
5. Long-Term Recovery: The impact of a single hard inquiry is minor and diminishes over time. It generally stops affecting your score after one year and disappears from your report entirely after two.

How Much Will Cancelling a Credit Card Application Affect Your Credit Score?

The impact of canceling a credit card application on your credit score depends largely on timing. Here are the key factors to consider:

• Hard Inquiry. If the issuer already performed a hard inquiry, it will stay on your credit report for two years. This inquiry can cause a small, temporary dip in your credit score.
• Timing of Cancellation. If you cancel before the lender pulls your credit, no hard inquiry is recorded. In this case, canceling the application will have no effect on your credit score.
• No Direct Penalty. Credit scoring models do not penalize you for withdrawing an application. Any potential impact on your score comes exclusively from the hard inquiry, not the cancellation itself.

How You Can Avoid Cancelling a Credit Card Application Affecting Your Credit Score

Reconsider Before Cancelling

The hard inquiry likely occurred the moment you submitted your application. Since the initial credit score impact is unavoidable, it may be better to see the process through. If approved, you can choose not to use the card or close the account later on.

Dispute Unauthorized Inquiries

If you did not authorize the application due to fraud or error, you can dispute the hard inquiry with the credit bureaus. Contact both the card issuer and the credit agencies to report the unauthorized activity, which can lead to the inquiry's removal from your report.

Ways to Improve Your Credit Score

Improving your credit score is an achievable goal that can significantly impact your financial health. With consistent effort and the right strategies, most people can see meaningful changes within a few months.

• Establish automatic bill payments. Your payment history is the most significant factor in your score, so setting up automatic payments and reminders is a key step to ensure you pay on time.
• Reduce your credit utilization ratio. Aim to keep your balance below 30% of your total credit limit, as a lower ratio is better for your score.
• Monitor your credit reports. Regularly check your reports from Experian, TransUnion, and Equifax to catch and dispute any inaccuracies or signs of identity theft.
• Become an authorized user. You can be added to someone else's credit card account that has a strong payment history to help build your own credit.
• Limit hard inquiries. Avoid applying for too many new credit accounts in a short period, as multiple hard inquiries can negatively affect your score.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as revolving credit and installment loans.

The Bottom Line

Cancelling a credit card application may or may not affect your credit score. The impact largely depends on whether the lender has already performed a hard inquiry on your credit report.

Frequently Asked Questions

Does cancelling a credit card application affect my credit score?

Cancelling before the issuer performs a hard inquiry will not impact your score. If a hard pull has already occurred, that inquiry will remain on your report.

Can I withdraw a credit card application after submitting it?

You can try to withdraw by contacting the issuer immediately. However, many processes are automated, so success isn't guaranteed if the review has already begun.

What happens if my application is denied instead of cancelled?

A denied application itself doesn't lower your score. The hard inquiry made during the process can cause a small, temporary dip, regardless of the application's outcome.