Does opening a new credit card hurt your credit?

When you apply for a credit card, you might see a brief dip in your credit scores. That’s because issuers typically use hard inquiries to review credit applications. 

But the dip could be a temporary thing if you use your credit card responsibly by doing things like paying your statement on time every month.

What you’ll learn:

• Applying for and opening a new credit card account may cause your credit scores to go down temporarily. 

• A new credit card might help reduce your credit utilization ratio and improve your credit mix, which could positively impact your scores.

• Paying your monthly credit card bill on time is another responsible habit that could help you raise your credit scores.

• Checking whether you’re pre-approved for a credit card typically requires only a soft inquiry, which won’t impact your credit scores.

Applying for and opening a credit card can affect a few credit-scoring factors. So it might help to think about them separately.

First, applying for a new card 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. Hard inquiries usually stay on your credit reports for two years. But FICO says it doesn’t consider hard inquiries that are more than 12 months old.

When it comes to hard inquiries, the Consumer Financial Protection Bureau (CFPB) says not to apply for credit you don’t need in order to minimize the impacts of multiple inquiries. “If you apply for a lot of credit over a short period of time,” the agency says, “it may appear that your economic circumstances have changed for the worse.”

If you’re approved for and open a new card, the average age of your credit might drop. But it could also affect your credit in a few helpful ways if you’re using the card responsibly. Here’s a closer look at how opening a new credit card and using it responsibly could benefit your credit.

Lenders use payment history to help determine how likely someone is to pay back debt. Payment history is also a major factor in how credit scores are calculated. Always paying your credit card bills on time can help you build a positive payment history. And that can help improve your credit scores.

When you open a new credit card, your available credit increases. This could improve your credit utilization ratio. This ratio refers to how much of your total available credit you’re using. As you use the card, the CFPB recommends keeping your credit utilization ratio below 30%.

Having a mix of revolving credit accounts, like credit cards, and installment accounts, like a mortgage, can show lenders that you can manage different types of debt. If a new card adds to your credit mix, that could be a positive.

The CFPB explains that credit scores are a reflection of a person’s experience with credit and loans. The agency says that having multiple examples of successfully managing debt could help: “Your score will improve the longer you have credit, open different types of accounts, and pay back what you owe on time.”

If you’re thinking about applying for a new card and want to minimize the effects on your credit scores, here are things you might consider doing:

1. Apply only for the credit you need. Each new credit application typically results in a hard inquiry that can slightly lower your credit scores. And applying for multiple credit cards in a short time can affect your credit even more.

2. See whether you’re pre-approved. Checking for card offers before you apply could help you avoid unnecessary hard inquiries. And if the pre-approval process involves a soft inquiry, it won’t affect your credit scores to check. If you get pre-approved, you can compare cards by looking at things like rewards, interest rates, fees and bonus offers.

3. Consider your full finances. If you plan to apply for a mortgage, the CFPB suggests limiting applications for other types of credit so you don’t harm your credit scores. But when it comes to the mortgage itself, the CFPB says multiple credit checks from mortgage lenders are recorded as a single inquiry if they’re all done within 45 days of each other.

Check out these frequently asked questions for more about how opening a new credit card could impact your credit scores.

Opening a new credit card account may cause a temporary dip in your credit scores. But making consistent on-time payments and avoiding high balances could positively impact your scores over time.

If you’re thinking about applying for a new card, you could compare Capital One credit cards and check whether you’re pre-approved before you apply. Pre-approval is quick and easy, and it won’t harm your credit scores.