Here’s What Happens When Someone With an 850 Credit Score Applies for New Credit

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Wondering what happens if you’ve reached the ultimate 850 credit score and need to apply for new credit? Read on to find out. 

You’ve worked hard and toiled for years of your adult life to achieve the “perfect” credit score of 850, and finally you’ve done it. Great job! You should be proud — after all, only 1.31% of Americans have achieved a perfect credit score, according to research from The Ascent.

But the time has come when there’s a shiny new credit card with a super tempting welcome bonus that’s caught your eye, and you want to apply. What happens now? Will you get approved? If so, will your credit score fall? And by how much?

Read on to learn the good and the not so good of applying for new credit once your score has reached 850.

First things first

There’s no need to mince words here, as you will almost certainly get approved for that new card when you apply! An 850 credit score shows lenders that you have maintained a mix of different types of credit accounts, paid off balances in a timely manner, and responsibly used your available credit for an extended period of time. You’re exactly the sort of consumer they want to lend to.

Perhaps one exception to instantaneous approval would be if you’ve decided to apply for a Chase credit card. Chase has a very strict rule in effect, called the 5/24 rule. It means that applicants who apply for a new card (no matter how high their credit score) and have opened five or more credit cards in the last 24-month period, will be denied. As long as this doesn’t apply to you, you should be golden.

New credit could ultimately benefit you

I know you’re looking at your beautiful, perfect score and bemoaning the idea of it being wiped away by a new credit application, but look at the bright side. As long as you continue to maintain the same responsible credit habits that got you to 850 in the first place, you’re likely to get there again. And a new credit account on your credit file could actually help with that.

New credit will give you a higher total credit limit, which will also help lower your credit utilization ratio. Let’s say you had $20,000 in available credit when you reached your 850. If you had an outstanding balance of $2,000 on a credit card, you’d be using 10% of your total credit. However, if you apply for new credit and increase your total available credit to $30,000, you’re now utilizing only 6.67% of your available credit with that same $2,000 balance. The lower your credit utilization, the better off you are in the eyes of the credit bureaus!

Now for the not so good

Let’s be frank. If you apply for new credit when you have an 850 credit score, your score will drop, there’s no way around it. How much it drops will depend on other factors relating to your own credit history, such as your length of credit history, credit mix, average age of accounts, and credit utilization. However, the drop should be relatively minor, and will definitely be one you can recover from.

The reason your credit score will drop is because by applying for new credit, you are altering the factors that go into calculating your credit score. New credit inquiries on your account will generally cause a minor drop on their own, as new credit accounts for 10% of your FICO® Score. But with a new account open, you’re also lowering the average age of your accounts, which accounts for 15% of your FICO® Score.

My personal experience

I am in my mid 30s and achieved an 850 credit score for the first time in late February of this year after pining after it for years, since my early 20s. The satisfaction that came with seeing those numbers at the top of my credit overview page was profound. So much so, in fact, that I found myself navigating back to that page several times over the coming weeks just to look at it and make sure it was still there. (It was).

But it wasn’t long before a new credit card came out with an excellent sign-up bonus, and I just knew I needed to have it. So I pushed my pride (and my perfect credit score) aside and I applied for that credit card in mid-March, and then another in mid-May. I was approved for both cards, and have earned two very hefty welcome bonuses as a result. Today, my credit score sits at 819. That’s a drop of 31 points in about four months’ time.

Is new credit worth losing your perfect score?

Is it a bummer to see my score fall that far after finally achieving perfection? A little bit. But I’m not worried about it. See, my credit score is still in the “Exceptional” credit range of 800-850, and as long as that’s the case, I know that I’ll be eligible for the best borrowing rates with all the other top-tier borrowers.

So, is it worth giving up your perfect credit score to attain a new line of credit? You’ll have to weigh the benefits for yourself. But if you’re able to earn a nice chunk of cash back or rewards, or use your new line of credit to improve your life in some other way, then yes, it is likely worth it. And, the good news is, you can immediately start working towards bringing your score back up. Personally, I love a good challenge, and I’m very much looking forward to the day where I can put those new credit applications behind me and once again see an 850 credit score attached to my name.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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