Here’s What Happens to Your Credit Score When You Get a New Credit Card

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New credit cards can be exciting, but will they hurt your credit score? Learn what to expect when you open a new credit card. 

A flashy welcome offer on a rewards card. A 0% APR period that’s 21 months long. A mass of bonus miles that would fly you to Auckland via Rome, New Delhi, and Kuala Lumpur, with hotel credits to stay where you land.

Yes, there are lots of reasons to get new credit cards, and, truthfully, lots of great credit cards to give you new reasons to get one. The problem is that credit cards aren’t free. And no, I’m not talking about APRs and annual fees (though those are important to consider, too). I’m talking about the impact on your credit score, what those new credit card applications will do once you’ve been accepted or denied.

To be frank, the ding to your credit score isn’t always as bad as you might think (as long as you’re not applying for, like, five cards at once). It could even improve your score over long periods. With that in mind, let’s look at the net impact a new card could have on your score.

You’ll authorize a hard inquiry on your credit report

Whenever you apply for a new credit card, the card issuer will run a hard inquiry on your credit report. Hard inquiries stay on your report for two years and can cause your score to drop initially by five to 10 points. Notice I said “initially:” Your score will bounce back. But the impact will be immediate.

Depending on your credit score, shedding five to 10 points could be inconsequential or it could mean the difference between having good credit and fair credit. For instance, let’s say you plan on applying for a conventional mortgage and your credit score is 622. Since most lenders require a 620 for a conventional loan, getting a credit card before your loan application would knock your score out of range — so it’s not a smart idea.

At the same time, if you had a credit score of 790, a new credit card wouldn’t have a huge impact. You’d still meet the requirements for the loan and you could take advantage of that new card’s perks.

In addition to hard inquiries, be mindful of the length of your credit history. Higher scores typically go to those who have a lot of experience with credit, meaning older accounts. A new credit card could make the average age of your accounts seem younger. For instance, if you have one five-year-old credit card and another that’s four years old, a newborn card could then shorten your account’s average age. The impact typically won’t be major but when combined with the hard inquiry it could drop your score by a noticeable amount.

New credit cards increase your total available credit

The upfront damage is unavoidable: If you want a new credit card, you’ll lose a few points to the hard inquiry and maybe some more to a younger account age. But these dings are temporary and will — with good credit card practices — correct themselves.

One of the long-term boons of opening new credit cards is that you’ll increase your total available credit. This could have a positive impact on your score. Credit utilization — the ratio of credit you’re using versus the total credit you have available — has a major influence on credit score models. For example, in your FICO® Score, credit utilization takes up 30%. That’s more than new credit (10%) and length of credit history (15%) combined.

Of course, this will only help if you keep your credit utilization low, ideally below 30%. But having more credit available will make the ratio less sensitive to your everyday spending.

Should you apply for new credit cards?

Opening a new credit card will have a temporary impact on your score (unless you open several at once, which could do more damage). Those with excellent credit can absorb the impact without many consequences, but if your score is on the borderline between good and fair — or lower — you might want to reconsider.

That doesn’t mean you shouldn’t open new credit cards. It’s a good idea to avoid it when your credit score is needed for other things, like getting a mortgage or cheaper car insurance. Take a look at your score, but if you can afford a five to 10 point decrease, the long-term benefits could outweigh the upfront costs.

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