What happens to your credit score when you apply for a credit card?

When you apply for a credit card a mark is placed on your credit file. But what does this actually mean? And how does applying for a credit card impact your credit score in the real world? Let's take a look.

Credit scores explained

Credit card providers will look at your credit score in order to determine the likelihood of repaying what you borrow.

A decent score will indicate that you're responsible with credit and likely to repay your balance. So if you have a good credit score, you'll have a better chance of being accepted for the most competitive credit card deals.

In contrast, if you have a poor credit score—or you've limited credit history—then you're more likely to miss out on the top deals. That's because a poor score indicates that you've incorrectly managed credit in the past—perhaps by missing repayments, or busting your limit. In similar fashion, if you don't have much of a credit history to speak of, then your score is also likely to be shaky, as you haven't previously demonstrated that you can be trusted with credit.

In order to check your credit score, lenders will turn to a credit rating agency. There are three major credit rating agencies in the UK; Equifax, Experian and TransUnion. Essentially, the job of a credit rating agency is to calculate the creditworthiness of individuals. Agencies do this by looking at your credit file which will list previous applications for credit you have already made. They'll also look at your credit history, to see if you've missed repayments in the past. Your credit utilisation is also likely to be looked at. This refers to how much available credit you are already using on existing credit cards, or loans.

In addition to personal information, public information is also likely to be used to determine your creditworthiness. This may include whether you're registered to vote, if you've applied for bankruptcy, or you've any County Court Judgments against your name.

There is no 'one-size-fits-all' score

Contrary to popular belief, there is no 'one-size-fits-all' credit score. Each agency calculates their own score which they share with lenders, who have their own scoring systems too. These are two big reasons why it's possible to get accepted for one credit card, even if you've been rejected for a similar card elsewhere.

While we're focusing on credit cards in this article, your credit score is also relevant when it comes to applying for other types of credit—such as a loan or mortgage.

What happens to your credit score when you apply for a credit card?

Every time you make an application for a credit card you undergo a 'hard' credit search. This leaves a mark on your credit file which is visible other lenders. This mark will indicate that you've applied for credit, though it doesn't show whether you've been accepted or rejected for a particular card.

In contrast, while 'soft' credit searches are also recorded on your credit file, lender's can't see them. This means you can undergo as many soft searches as you like, as it will have no impact on your credit score.

Hard searches leave a mark on your file for a year or so. For most, the odd search will have a negligible impact on your score. However, make lots of hard searches in a short space of time and you may start to give lender's the impression that you've a desperate need for credit.

To lean more about this topic, see our article: Hard vs soft credit searches.

How to avoid multiple hard searches over a short space of time

If you're rejected for a credit card, it may tempting to immediately apply for another. Yet, if you do apply for another card and get rejected again, your credit score could take a hit and put you on the path of a rejection spiral. That's because after each rejection, you may find it more difficult to get accepted for subsequent cards.

To avoid falling into a rejection spiral, it's worth using a credit card eligibility checker, or calculator. These are online tools that allow you to see the likelihood of being accepted for particular credit cards, without having to make a formal application. In addition, some calculators will also offer cards with 'pre-approval'. These refer to cards that you'll definitely be accepted for if you do go on to apply for a card.

When you use a credit card eligibility checker, you'll only have to undergo a 'soft' credit search. This means you can use one as many times as like, without having to worry about lender's seeing your activity. Of course, if you do go on to apply for a card after using a calculator, your application will then be recorded as hard search.

Can you check your credit score?

All three credit agencies allow you to review your credit score. Experian, the UK's largest credit rating agency, allows you to access your score for free.

Checking your credit score is important for two reasons:

1. You can see if your score is decent. If you've a decent credit score, then great—it's likely you'll be accepted for the most competitive credit card deals. However, if your credit score is less than perfect, then you can take steps to improve it. For more on this, take a look at our article that explains how to improve your credit score.

2. You can check for errors. When it comes to your credit file, mistakes can happen. For example, your credit file may incorrectly state that you've missed payments. This is why checking your credit file regularly is important, as any mistakes can be rectified.

To learn more about your credit score, take a look at our article: What is a credit score?