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Does applying for a credit card hurt your credit?

Applying for a new card can lower your credit score by a few points, but can help your credit mix and utilization.

When you apply for a new credit card, the card provider performs a hard credit check, which can decrease your credit score by a few points. However, with regular payments, new credit can improve your credit mix and utilization and increase your score over time.

2 reasons why it can hurt your credit

There are two main ways applying for a new credit card can negatively impact your credit score.

  1. A hard credit check decreases your credit score. When you apply for a new credit card, the provider performs a hard check of your credit history. A hard check can lower your score by around five to 10 points, depending on your current credit score.
  2. The average age of your accounts goes down. The length of your credit history is worth 15% of your credit score. When you open a new credit card, the average age of your accounts decreases.

How much will a new credit card affect my score?

A hard credit check can decrease your score between five to 10 points. This decrease is temporary and typically only impacts your credit score for up to 12 months. Your score usually bounces back quickly, provided your credit history remains positive. However, a hard credit check remains on your credit report for up to two years.

How a new credit card can help your credit

Applying for a new credit card can help your credit score in the long run, as it can improve these credit score factors:

Credit mix

There are two types of credit accounts: installments and revolving. Installment accounts have fixed payments with an end date, like a mortgage or car loan. Revolving accounts do not have an end date but usually have a minimum payment due each month. Credit cards are revolving accounts.

Your credit mix makes up 10% of your FICO credit score. Credit bureaus like to see a mix of both types of accounts, as it indicates you can effectively manage different kinds of credit.

If you primarily have installment accounts on your report, adding a new credit card can help your credit mix and potentially increase your credit score.

On-time payment history

Your payment history is the most important factor on your credit report, accounting for 35% of your FICO credit score. It shows how many payments you’ve made on time, how often you miss payments and the number of days you’re past due on a payment.

With regular, on-time payments, a new credit card can help demonstrate you can manage your credit well. Paying your bills on time is one of the best ways to improve your credit score.

Credit utilization

Your credit utilization ratio represents how much of your total available credit you’re currently using. Credit bureaus typically reward a credit utilization ratio of under 30%.

Applying for a new credit card can increase your total credit limit and lower your utilization ratio.

For example, if you’ve charged $500 to your credit card and your total credit limit is $1,000, then you’re using 50% of your credit utilization. But if you open a new credit card with a $1,000 limit, then your total credit limit becomes $2,000, and your credit utilization becomes 25%.

Things to know before applying for a new credit card

While it’s up to the card provider to decide if you’re eligible for a new card, there are a few things you can do to improve your chances.

  • Check your credit report first. You’re entitled to a free copy of your credit report every week from the three major bureaus. If you find inaccurate information on your report, file disputes with the credit bureaus and get your report cleaned up before applying for new credit.
  • Get preapproved. Prequalifying helps you understand what sorts of cards you’re most likely to be approved for, which lowers your chances of being rejected and having to apply for multiple cards. Preapprovals usually require a soft credit check, which doesn’t harm your credit score.
  • Don’t apply for multiple cards at once. Unlike shopping for a mortgage, you’ll receive a hard credit check every time you apply for a credit card, even in a short time. While a single hard check might not lower your score much, several checks can add up quickly.
  • Consider credit-building debit cards. If you have poor or limited credit history, a credit-building debit card doesn’t check your credit score for approval and is secured by a linked bank account. Payments using this card are reported to credit bureaus and help build your credit history.

Bottom line

When you open a new credit card, expect a small, temporary drop in your credit score. However, your score should bounce back within a few months, especially if you make on-time payments and keep your credit utilization low.

Before you apply, check your credit score to better understand what sorts of cards best match your credit history.

Written by

Holly Jennings

Holly Jennings is an editor and updates writer at Finder, working with writers across all niches to deliver quality content to readers. She’s edited hundreds of financial articles ranging from credit cards to investments. With empathy at heart, she especially enjoys content that breaks down complex financial situations into easy-to-understand information. Prior to her role at Finder, she collaborated with dozens of small businesses to maximize the reach and impact of their blog posts, website copy and other content. In her spare time, she is an award-winning author for Penguin Random House, writing about virtual reality worlds, magical girls and lasers that go pew-pew. See full profile

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