My recommendation to anyone taking the test is to not cancel your score unless something truly tragic happens during the course of the exam, like you passing out during the quant section. If you cancel your score, that cancellation will be reported on your official report as a scheduled test without a score, much like you skipping the test altogether. I would argue that a cancelled score may be a bigger negative than a lower score.
More importantly, the vast majority of business schools take only your highest GMAT score into account when evaluating your application. Why? First, it is in their best interest to inflate their mean and median GMAT scores to keep their rankings high. Second, business schools do not see the GMAT as a test of innate intelligence but rather as a measure of your preparation for business school. They want to know that at the time of your eventual matriculation, you will have the basic skills (quantitative, reasoning, writing, etc.) necessary for success in their programs. Whether you prove yourself on your first, second, or third attempt is irrelevant as long as you demonstrate your readiness somewhere along the way.
Also, keep in mind that business schools evaluate not only your academic qualifications (e.g., GMAT and GPA), but also your professional promise. They gauge this by your career choices and successes and by your demonstrated determination to succeed. If you present a GMAT score that is clearly below a school's standards, the admissions office will question your drive and consider you unrealistic. Taking the exam again shows determination and an appreciation for what it takes to achieve your goals, all desirable traits in a business school applicant.
Hope that helps!
Kyle Widdison | Manhattan GMAT Instructor | Utah
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