Does opening a new credit card hurt your credit?
Opening a new credit card can offer an opportunity to earn rewards, build credit or take advantage of an introductory offer. When you apply for a credit card and open a new credit card account, you might see a brief dip in your credit scores. But if you use your credit card responsibly, it could give you the opportunity to boost your credit in the long run.
Here’s what you need to consider before applying for and opening a new credit card. Plus, explore some of the benefits you may experience with your new card.
What you’ll learn:
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Applying for and opening a new credit card may cause a temporary dip in your credit scores.
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Getting pre-approved for a credit card only requires a soft inquiry, which won’t impact your credit scores.
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A new credit card might help reduce your credit utilization ratio and improve your credit mix, which could positively impact your scores over time with responsible use.
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Paying your monthly credit card bill on time could help you establish and build a positive payment history, which can help raise your credit scores.
Will opening a new credit card hurt my credit scores?
Opening a new credit account will typically reduce your credit age, which may impact your credit scores. Applying for a new credit card also triggers a hard inquiry, which involves a lender looking at your credit reports. According to credit-scoring company FICO®, a hard inquiry can cause a slight drop in your credit scores. Multiple hard inquiries in a short period of time can have a more pronounced impact.
Hard inquiries usually stay on your credit reports for two years. However, they may not affect your scores for that long. For example, credit-scoring companies may only consider hard inquiries for up to 12 months.
Benefits of applying for and opening a new credit card
While opening a new card can negatively impact your credit scores in the short term, it may actually benefit your scores in the long term as long as you use your card responsibly. Take a closer look at some of the benefits of applying for a new credit card.
Improve your payment history
Lenders use payment history to help determine how likely someone is to pay back debt. It can also be a major factor in calculating credit scores. Always paying your credit card bills on time can help you build a positive payment history. And that can help improve your credit scores and increase your chances of getting approved for loans with better terms in the future.
Decrease your credit utilization ratio
When you open a new credit card, your available credit increases. This could improve your credit utilization ratio. This ratio refers to how much total available credit you’re using, and it’s a factor in calculating your credit scores. The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio below 30%.
Diversify your credit mix
Your new card could improve your credit mix or the different types of credit accounts you have. Having a mix of revolving credit accounts and installment credit—and always paying on time—can show lenders that you can responsibly manage different types of debt.
Other benefits of opening a new credit card
Opening a new credit card could also help you:
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Take advantage of introductory offers and sign-up bonuses.
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Use a balance transfer to help pay off high-interest debt at 0% or low introductory rates.
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Earn rewards.
Does pre-approval for a credit card lower your credit scores?
Pre-approval or pre-qualified offers can help you explore potential card options before you apply. The good news is that pre-approval doesn’t affect your credit scores. But if you choose to apply for a pre-approval credit card offer, the application will trigger a hard inquiry, which can impact your scores.
Checking whether you’re pre-approved before applying for a credit card could minimize the number of hard inquiries on your credit report and help you avoid application rejections. That’s because receiving a pre-approval offer often means you have a good chance of being approved for that specific card.
What to consider before applying for a new credit card
The CFPB recommends only applying for the credit you need. And researching card features can help you narrow down your search. Here are a few things to look into before applying for a new card:
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Interest rates
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Fees
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Rewards
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Introductory offers
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Eligibility requirements
New credit cards and credit scores FAQ
Learn more about how opening a new credit card impacts your credit scores with the answers to these frequently asked questions:
Will applying for a new credit card hurt my chances of getting a loan?
If you’re thinking about applying for a loan, such as a mortgage, it’s best to hold off on applying for a new credit card until some time after you’ve applied for the loan. That’s because the temporary drop in your credit scores may affect your approval or the interest rate you pay on your loan. Experts recommend waiting about three to six months between applications for a loan and a new credit card.
How much does your credit score drop when you open a new credit card?
Opening a new credit card will generally only decrease your credit scores by a few points, according to FICO.
How long does it take for your credit score to go back up after opening a new credit card?
Applying for a credit card triggers a hard inquiry, which stays on your credit report for two years. However, your scores should typically rebound within a few months, as long as you’re using the card responsibly.
Does it hurt your credit score if your credit card application is denied?
Getting denied for a credit card won’t hurt your credit scores. However, the hard inquiry that was triggered by your application could negatively affect your scores, regardless of whether it’s approved or denied.
If your application is denied and you decide to submit another one, remember that every credit application triggers a new hard inquiry. One hard inquiry typically has a small effect on your scores. But multiple hard inquiries may have a more significant impact.
Key takeaways: Does opening a credit card hurt your credit?
Opening a new credit card may cause a temporary dip in your credit scores. But making consistent on-time payments and avoiding high balances can positively impact your credit scores over time.
You may be able to see whether you qualify for new credit before triggering a hard inquiry. You can compare Capital One credit cards and check for pre-approved card offers before you apply. Pre-approval is quick and easy, and it won’t harm your credit scores.
