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Having your credit card declined can be a frustrating experience, not to mention embarrassing. While there are several reasons your credit card issuer may decline a transaction, you generally don’t need to worry about the action hurting your credit score.
But depending on why your card was declined, there may be other factors at play that could negatively affect your credit score. Here’s what you need to know.
Why your credit card may be declined
Credit cards offer a convenient and secure way to make purchases. However, your credit card issuer may occasionally decline a transaction. In most cases, it’s likely for your protection. But in others, it may be due to an issue you need to address.
Here are some of the most common reasons your card issuer may decline a transaction:
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The issuer suspects fraud: If you’re traveling or make a large purchase outside of your normal spending habits, your card issuer may suspect that someone has stolen your credit card. As a result, it’ll typically decline the transaction and contact you to confirm that you were the one who made the purchase.
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You’ve reached your credit limit: In some cases, card issuers may allow you to spend beyond your credit limit in exchange for a fee. But if you’ve maxed out your card, you can generally expect future transactions to be declined until you pay down your balance.
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The card has a hold on it: If you’re renting a car or booking a hotel room, the merchant may place a hold on your card, which reduces your available credit. This can also happen with other merchants. In any case, if you’re close to your credit limit, the hold could prevent you from making purchases until you pay down your balance or get the hold removed.
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Your card is expired: Generally, you can expect to receive a new card in the mail before your current one expires. But if it somehow gets delayed or you forget to switch cards, you may run into declined transactions. This can also happen if you’ve requested a replacement card and then tried to use the original one.
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The card has been closed: Whether you or the card issuer closed the account, it will no longer be usable. Note that card issuers may close your account without your authorization if it’s been inactive for a long time or you’ve violated your cardholder agreement.
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You’re behind on payments: If you’ve missed one or more payments, your card issuer may lock your card until you get caught up.
When does getting your credit card declined hurt your credit score?
When a credit card issuer declines a credit card transaction, the act alone won’t have any impact on your credit score.
But depending on the reason for the decline, your credit score may already be suffering. Here are some credit score factors that could be impacting you and what you can do about it.
High credit utilization rate
If you’ve maxed out your credit card or your available credit is low due to a hold, it’s likely that you have a high credit utilization rate — the percentage of available credit you’re using at a given time.
Your utilization rate is one of the most influential factors in your credit score, so having a high one could cause a significant drop. While some experts recommend keeping your utilization below 30%, there is no hard-and-fast rule — the lower it is, the better.
If your card issuer declines a transaction for this reason, review your debt situation and take steps to pay down your credit card balance as quickly as possible.
Account closure
If you or the card issuer recently closed your credit card account, your credit score could dip temporarily for a few reasons:
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Utilization rate: When you close a card, you no longer have access to its available credit. If you have a high utilization rate on other cards, your aggregate utilization across all of your cards can spike when you close a card.
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Length of credit history: For this factor, FICO considers how long you’ve been using credit and the average age of all of your credit accounts. If the card that was closed was one of your oldest accounts, it could hurt your credit score in the short term.
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Credit mix: FICO also considers how diverse your mix of credit accounts is. If you closed your only credit card, it could hurt your credit score.
Keep in mind that it can still make sense to close a credit card if it’s beneficial for your financial health. If you have trouble with overspending or don’t want a steep annual fee, the benefits can outweigh the costs.
If your card issuer closed your account without you requesting it, contact your card issuer to see if it’s possible to have the account reinstated.
Late payments
Your payment history is the most important factor in your FICO score, and if you’ve missed a single payment by 30 days or more, it could knock as many as 100 points off your credit score — or more in some cases. You may also be subject to a late fee and other consequences.
If your card was locked due to missed payments, it’s crucial that you get caught up as quickly as possible. While you can’t remove a legitimate late payment from your credit reports, you can take steps to pay on time going forward.
Fraud
If you’re a victim of identity theft, fraudulent purchases on your credit card may be the least of your worries. If the criminal also has access to your Social Security number, they may attempt to open credit accounts in your name, which can damage your credit score.
If someone has made unauthorized purchases on your credit card, visit AnnualCreditReport.com and request your credit reports from all three credit bureaus to check for more fraudulent activity.
If you find inaccurate or fraudulent credit report information, you have the right to dispute it with the credit bureaus.
Read more: How to protect yourself against credit card fraud
Take action if your card is declined
If your credit card has been declined, contact your credit card issuer to find out why. In many cases, it may have been an error due to suspected fraud. If that happens, you’ll typically be able to use it again immediately.
In other cases, however, you may need to take certain steps to get your account in order, such as paying down your balance, getting caught up on payments, or switching to your new card.
If the reason for the declined transaction also impacts your credit score, it’s crucial that you take steps to address the problem to avoid further damage to your credit and get your account back in good standing.
This article was edited by Alicia Hahn
Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn’t include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.