Will opening a new credit card hurt my credit score?

Opening a new credit card may temporarily affect your credit score.

When a card issuer reviews your credit information because you applied for a credit card, it is a “Hard shot.“It can cause your credit score to drop slightly whether you are approved or not.

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Other ways to open a new credit card can hurt your credit

Just applying for a new card can drop your score a bit, but a new card can drop more if you use that new line of credit a lot. Or if you only have one or two other cards and they are only a few years old.

Here’s how opening a new card can hurt your credit:

Higher balances. A new credit card can hurt your score if you make a large purchase or get a balance transfer card and transfer your higher interest debt to the card so you have a use of credit. The amount of your credit limit that you use is heavily weighted. Credit usage is calculated both per card and globally.

Experts recommend not to exceed 30% on any card, and less is more.

However, it’s a good idea to look at overall finances, not just your credit score. Accepting a drop in your score due to high credit usage because you got a 0% balance transfer card to pay off debt may be worth it.

Lower average age of accounts. The length of your credit also affects your score. Your new card may reduce the average age of your credit. If you have a few credit cards, it will have a bigger impact than if you have several.

Length of credit history, however, is a relatively minor factor in credit scores. It counts for 15% of your FICO score. VantageScore, another credit score provider, lists “age and type of credit” as “very influential.”

There are also advantages to opening a new card

A new line of credit can also improve your credit profile.

A better record. Paying on time, every time is essential for good credit. FICO, the most widely used credit score for credit decisions, indicates that payment history accounts for 35% of the credit score. Competitor VantageScore Calls him “extremely influential”.

If you try to build credit, nothing is more important than consistent and on-time payments. A new account gives you another opportunity to build a record of on-time payments.

No more space on credit cards. A new card will increase your overall credit limit. If your spending stays the same, your overall credit usage will be lower, which could improve your score.

Diversity of credit. Credit scores award points for showing you can manage more than one type of credit. If you have an installment loan but don’t have a credit card, managing your new credit card successfully is likely to help. But if you already have multiple credit cards, adding one is not as likely to have much of an impact.

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