Does opening a new credit card hurt your credit score?
After applying for a new credit card, you might be disappointed to see a slight dip in your credit score. But don’t panic: This drop is normal, and responsible credit card use can help your score over time.
If you’re wondering whether opening a new credit card hurts your credit score, here’s what to know.
How opening a new credit card affects your credit score
When you open a new credit card, your credit score could drop by a few points. This is due in part to a hard credit pull, which the card issuer performs as part of the application process. The issuer uses this hard credit check to determine your ability to manage debt before approving or denying your application.
However, the hit to your score is usually temporary. What matters more is whether or not you pay your credit card bills on time. If you do, your score will likely recover from the initial drop and improve over the long run.
Find out: What affects your credit score?
Pros and cons of opening a new credit card
Opening a credit card can temporarily hurt your credit, but there are other effects it can have on your finances. Before applying for a new card, consider these pros and cons:
Pros
- Can potentially increase your credit mix
- Can lower your credit utilization (if you don’t increase overall spending)
- Can help cover emergency expenses
- On-time payments build a positive payment history
- Can earn cash back, points, or other rewards with certain cards
- Some cards offer an introductory promotional period with 0% APR
Cons
- Hard credit inquiry during application can temporarily lower your credit score
- Opening a new credit account lowers your overall credit age
- Having another card might tempt you to overspend
- Higher credit card interest rates can make it challenging to get out of debt
- Might come with fees, such as annual fees, balance transfer fees, late fees, cash advance fees, and more
- Irresponsible use can damage your credit
Why your credit score may go down at first
Regardless of how responsible you are with credit, applying for a new card will likely cause your credit score to drop in the short term. Here’s why:
Triggers a hard inquiry
Applying for a credit card involves a hard credit inquiry. This is when the issuer pulls your credit report to gauge how likely you are to repay your debt and determine whether to approve your application.
A hard inquiry isn’t the end of the world, however. It typically lowers your credit score by less than five points, and the negative impact fades over time. But beware of applying for several new cards all at once. Multiple inquiries within a short period of time can be a red flag to lenders and might have a bigger negative impact on your credit score.
Shortens your credit history
Your credit history measures the length of time your credit accounts have been open. The longer your credit history, the better for your credit. When you open a new credit card, your average credit age will drop, potentially lowering your credit score.
When you should avoid opening a new credit card
Opening a new credit card isn’t inherently bad, but you should be strategic with your timing. For example, avoid opening a new credit card when:
- You’ve recently applied for new credit. Multiple hard inquiries within a short period of time can have a larger negative impact on your scores. However, remember that if you rate shop within a 14- to 45-day window, multiple inquiries will be treated as a single hard credit check.
- You have a low credit score. Having a low credit score already means you risk getting denied for a new credit card and taking a hit to your credit score from the hard credit check. If you need access to a card quickly, you might consider safer options that have less stringent requirements, such as a secured card. Otherwise, it could be worth taking the time to build your credit before applying in the future.
- You already have a lot of debt. If you’re up to your ears in consumer debt, getting a new credit card probably isn’t smart. You might be tempted to overspend and rack up additional debt when you have more credit available to you. Consider paying down your existing debt and building good credit habits before adding a new credit card to the mix.
How opening a new credit card can help your credit score
Despite the initial credit score drop, opening a new card can actually help your credit score long-term. Here’s how:
Lower credit utilization
When you open a new credit card, you add available credit to your account. This can lower your credit utilization ratio — which compares how much credit you’ve used on revolving credit lines (like credit cards and lines of credit) to your total credit limits — provided you aren’t spending more across all of your accounts.
Here’s an example of how opening a new card can lower your credit utilization. Say you have the following cards, credit limits, and balances:
| Credit limit | Balance | |
|---|---|---|
| Credit card A | $5,000 | $2,000 |
| Credit card B | $2,000 | $1,000 |
| Total | $7,000 | $3,000 |
To calculate your credit utilization ratio, divide your total balance by your total credit limit. In this scenario, your credit utilization is around 43%.
But say you apply for a third card with a $3,000 limit, which would increase your available credit limit to $10,000.
| Credit limit | Balance | |
|---|---|---|
| Credit card A | $5,000 | $2,000 |
| Credit card B | $2,000 | $1,000 |
| Credit card C | $3,000 | $0 |
| Total | $10,000 | $3,000 |
As long as you don’t charge more to your cards and add to your balances, your credit utilization would drop to 30%.
Build solid payment history
Payment history has the biggest impact on your overall credit, making up 35% of your FICO score. While building a positive payment history can take time, it’s relatively simple to do. When opening a new credit card, make sure you pay your bills on time, every time. If you’re worried about missing due dates, you can always enroll in automatic payments.
How much does your credit score drop?
When you apply for a new credit card, the hard inquiry typically lowers your credit score by no more than five points. However, the drop can be bigger if you’ve applied for multiple cards within a short amount of time (outside of the rate-shopping window).
Keep in mind your score might tumble further based on other factors, such as your average credit age. If you have only one or two other credit accounts, opening a new account could dramatically reduce your average credit age, which can take an additional toll on your credit score.
How long does a new card stay on your credit report?
A hard inquiry stays on your credit report for up to two years, but the impact lessens over time. Additionally, FICO scores consider inquiries only within the last year.
Similarly, while opening a new credit card affects your average account age, this impact will also fade as time passes.
How to open a credit card without hurting your credit score
You can’t avoid a hard inquiry — and the related drop in your credit score — when applying for a new credit card. But there are some precautions you can take to limit the negative impact.
- Apply for cards selectively. Don’t apply for every credit card you can qualify for. Instead, be deliberate and apply for a new card only when the benefit is clear. Many card issuers allow you to pre-qualify with a soft credit check that won’t hurt your credit score. This can help you choose which cards are worth applying for and avoid unnecessary hard credit inquiries.
- Space out applications. Outside of rate shopping, multiple hard inquiries in a short period of time can have a bigger negative impact on your score. Many experts suggest waiting six months between applications to avoid this.
- Keep your balance low. In general, the lower your credit utilization, the better for your credit score. For the best odds of improving your credit score, try to spend modestly on your new credit card and any other revolving credit accounts you already have.
- Pay your bill on time. Payment history has the biggest impact on your credit score, so making all of your payments on time is crucial. Consider enrolling in automatic payments to make sure due dates don’t slip through the cracks.
Find out: How many credit cards should I have?
Should you open a new credit card?
Opening a new credit card will cause a small, short-term dip in your credit score, but that doesn’t mean you should avoid it. As with other financial decisions, think long-term when opening a new credit card. If you pay your bills on time and avoid borrowing more than you can afford, opening a new credit card could help you build a solid credit history over the long run.
Keep reading: Does closing a credit card hurt your credit score?
New credit card FAQs
Yes. Opening a new credit card involves a hard credit check, which temporarily lowers your score. A new account also lowers your average credit age, which can cause a further drop in your score. However, both of these negative impacts are usually temporary and will fade over time.
Generally, a hard inquiry only lowers your score by a few points. But the overall impact of applying for a new card depends on other factors, including your average credit age and how recently you’ve applied for other credit cards.
A hard credit inquiry stays on your credit report for up to two years, but the impact lessens over time. Other factors like your credit mix, payment history, credit age, and credit utilization will continue to affect your credit score in the future.
Yes, opening a new credit card can improve your score over time if you make on-time payments and maintain a healthy credit utilization. But opening a new card will likely result in a small, temporary drop in your score.
It’s also important to manage your new card responsibly to avoid potential damage to your credit score in the future.
