Edited by: Keri Stooksbury
- What Makes up a Credit Score
- How Opening a New Credit Card Affects Your Credit Score
- Additional Actions That Can Hurt or Improve Your Credit Score
- Everything Else You Need To Know About Opening a New Card
- Final Thoughts
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It’s a question we hear frequently — “Doesn’t opening all those rewards-earning credit cards hurt my credit score?” It’s a valid question and one that deserves a clear answer.
So, does opening a new credit card really hurt your credit score, and is there anything you can do to minimize the impact?
The short answer is yes, and yes, but there’s more to the story. And, spoiler alert, there is a happy ending.
If you’re planning on opening a new credit card (or 2!), you’ll want to take a moment to read why it’s fine to do so and what to expect when you do hit apply.
What Makes up a Credit Score
Before we talk about how applying for or opening a new credit card affects your credit score, it’s important to know what factors make up your credit score.
Let’s look at those factors in order of how much each affects your credit score:
- Payment History — The most important factor affecting your credit score is how you’ve managed credit in the past. A past bankruptcy or late payments (more than 30 days) can hurt your credit score dramatically. Making consistent on-time payments increases your score.
- Amounts Owed — Credit utilization is another important factor. If you’re using a large percentage of your overall credit limits, your score will be negatively affected. Keeping your utilization at 10% or below can positively affect your score. If your utilization ratio is higher than 30%, your score can take a negative hit.
- Credit History — A lengthy credit history is seen as a positive attribute. If you have older credit cards, it’s good to keep them open as this can improve the length of your credit history. Closing older cards not only decreases the average age of your accounts but also decreases your available credit, which also affects your credit utilization percentage.
- New Credit — If you’ve applied for credit, the lender may need to do a hard pull inquiry on your credit report. Too many hard pulls can negatively affect your credit score. Opening too many new credit accounts (including credit cards) can also lower the average age of your credit.
- Credit Mix — While not a major factor in your credit score, having managed different types of credit accounts is seen as a positive trend. A car loan or mortgage in addition to credit cards would be examples of other types of credit accounts.
The process may seem complex but once you understand how credit-related actions affect your score, you’ve gained the power to build a great asset.
How Opening a New Credit Card Affects Your Credit Score
Now that you have a basic understanding of how your credit score is determined, let’s look at how applying for, or opening, a new credit card can affect your score.
When you apply for a credit card, the card issuer runs a hard inquiry on your credit report to get more information about your credit profile. This action can temporarily decrease your credit score by approximately 5 to 10 points, which is not a large amount. The good news is that it’s a temporary decline and your score can recover over time.
After the hard inquiry, the credit issuer will either approve you for the card, deny you, or tell you they need to review your application further.
If you are approved for the card, the resulting credit limit you receive may help increase your credit score over time. Reflecting back on the credit score factor of “Amounts Owed” and the associated credit utilization, you may now have a greater credit capacity. If you keep your balances low, this can positively affect your credit score.
Unfortunately, a denial still leaves you with a hard inquiry on your credit report and the associated drop in your credit score. However, even in the case of a denial, your score will eventually recover from a hard inquiry.
By now, you may be thinking, “If 1 credit card lowers my score, will a large number of credit cards lower it even more?” Not necessarily. More cards, managed well, can actually continue to improve your score. It’s possible to have 10+ credit cards with a credit score over 800!
Additional Actions That Can Hurt or Improve Your Credit Score
Now, let’s look at how applying for, opening, and managing a credit card fit into the entire scenario of affecting your overall credit score.
Specific actions, including opening a new credit card, may hurt or improve your credit score. Here are some examples of actions that affect your score in either a negative or positive way.
Actions That Can Hurt Your Credit Score
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|Action||Credit Factor Most Negatively Affected (Ranked From Most Influential to Least)|
|Making late payments||Payment history|
|Keeping high balances in relation to your cards’ credit limits||Amounts owed|
|Closing your oldest credit cards||Credit history|
|Applying for too many credit cards within a short period of time||New credit|
|Having only credit card debt||Credit mix|
Actions That Can Improve Your Credit Score
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|Action||Credit Factor Most Positively Affected (Ranked From Most Influential to Least)|
|Making your payments on time||Payment history|
|Keeping your card balances low in relation to credit limits||Amounts owed|
|Keeping your oldest card open||Credit history|
|Spreading out credit applications over time||New credit|
|Having a mix of credit products you manage||Credit mix|
Everything Else You Need To Know About Opening a New Card
Banks Have Rules for Opening Credit Cards
Each lending institution has its own rules relating to how many cards you can open, limits on the frequency of opening cards, and even separate rules if you’re a current bank customer.
If you have a business, even a small one, you may be able to apply for a business credit card without affecting your personal credit score.
To learn more about the rules for each bank, including eligibility, how often you can receive a card’s welcome bonus, and more, you’ll want to read our comprehensive guide to each bank’s credit card application rules.
Securing a Free Copy of Your Credit Report
Before you apply for any credit card, you’ll want to know what your current credit score is and that your credit report includes accurate information. Fortunately, you can easily order a copy of your credit report for free.
Contrary to common belief, accessing your credit report does not hurt your score. For more information on how to access your credit report for free, we’ve gathered everything you need to know in our how-to article.
Yes, your credit score does take a minor hit when you apply for a credit card, but the decrease is relatively small and temporary.
If you’re considering applying for a new credit card, make sure you know your credit score and check your credit report for accuracy.
Learn about the card issuer’s requirements before you apply to minimize unnecessary denials and the associated disappointment. A little knowledge can go a long way toward securing the right cards for your situation.
Featured Image Credit: Upgraded Points
Frequently Asked Questions
Does opening a credit card hurt your credit score?
Yes. Your credit score will drop slightly when the card issuer does a hard inquiry on your credit report. Fortunately, this dip in credit score is short-lived and your score will rebound over time.
A new credit card can also have a positive impact on your score by increasing the amount of your available credit, as long as you keep your balances low.
Does having more credit cards help your credit score?
It can. If managed well, having multiple credit cards can improve your credit score. To improve your score with multiple cards, you’ll want to make on-time payments, keep low balances in relation to your credit limits, spread new applications out over time, and keep older cards open.
Does closing your first credit card hurt your credit score?
It can. Keeping your oldest credit card open helps increase the average age of your credit, which is a factor that makes up your credit score.
Additionally, the credit limit on your oldest card is lost when you close the card. The result can increase your overall credit utilization.
If the card has an annual fee, try to product change to a card with no annual fee. If this is not possible, try asking to have the credit limit moved to another card with the same bank, if you have one.
Does checking my credit report hurt my credit score?
No, requesting a copy of your credit report does not hurt your credit score.
In fact, it is recommended that you review your credit report periodically to check for accuracy.
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