Does Opening a New Credit Card Hurt Your Credit Score?

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.

Bottom Line: Credit scores are generated by looking at several factors that include payment history, amounts owed, credit history, new credit, and the mix of credit. Your payment history and your credit utilization (amounts owed compared to your credit limits) are the most influential factors and can make up 65% of your credit score. 

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!

Bottom Line: While opening a new credit card can temporarily affect your credit score negatively by a few points, if managed well over time, your credit score will recover and can actually become higher than it was before. Generally, hard inquiries are taken off your credit report within 24 months, but your credit score may only be affected for a few months to a year by a hard inquiry.

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

Actions That Can Improve Your Credit Score

Bottom Line: Even if opening a new credit card drops your score slightly, your score can recover quickly by making on-time payments, keeping card balances low, leaving your oldest cards open, not applying for a large number of credit cards in a short period of time, and having a mix of the types of credit accounts you manage. 

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.

Final Thoughts

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.