Does opening a new credit card hurt your credit?
September 12, 2023 5 min read
Opening a new credit card can be a way to find a low interest rate, earn travel rewards or take advantage of an introductory offer. When you 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 opening a new credit card—and some of the benefits you may experience with your new card.
- Applying for and opening a new credit card may cause a temporary dip in your credit scores.
- Getting pre-approved for a credit card only requires a soft inquiry, which won’t impact your credit scores.
- A new credit card might help reduce your credit utilization ratio and improve your credit mix—which could have a positive impact on your scores over time with responsible use.
Will opening a new credit card hurt my credit scores?
Applying for a new credit card can cause a temporary drop in credit scores—but it helps to know the difference between hard and soft credit inquiries. Read on to learn how different steps in the credit application process could affect your scores.
Getting pre-approved for a credit card
Before applying for a credit card, it’s a good idea to get pre-approved. Lenders make a soft inquiry on your credit to determine whether you qualify for pre-approval. And while soft inquiries may include a review of your existing accounts and credit reports, they won’t impact your credit scores.
Applying for a credit card
Applying for a new credit card can trigger a hard inquiry, which involves a lender looking at your credit reports. According to credit-scoring company FICO®, hard inquiries can cause a slight drop in your credit scores.
Keep in mind that hard inquiries usually stay on your credit reports for two years. However, they may not have an effect on your scores for that long. For example, credit-scoring companies may only consider hard inquiries for up to 12 months. But experts don’t advise opening several new credit accounts in a short period of time.
The age of your credit accounts is also typically a factor in calculating your credit scores. Having a longer credit history can be helpful. But when you open a new credit card, it could bring the average age of your credit accounts down and affect your credit scores.
Benefits of opening a new credit card
Your new credit card may provide you with many benefits—and not just cash back or travel miles. Even though opening a new card may cause a temporary dip in your credit scores, you could improve your credit scores over time by using the card responsibly. Take a closer look at some of the benefits of applying for a new credit card.
Decrease your credit utilization
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. Experts recommend keeping your credit utilization ratio below 30%.
If you avoid charging large purchases and keep your balance low, you could maintain a low credit utilization ratio.
Improve your credit mix
Your new card could improve your credit mix—or the different types of credit accounts you have. Mortgages and student loans are common kinds of what might be considered good debt, or debt that helps borrowers build wealth. Credit card issuers like to see that borrowers can responsibly manage these different types of debt—making payments on time and in full.
But revolving credit may start to be considered bad debt if there’s a history of late or missed payments. Carrying high monthly credit card balances each month can increase your debt-to-income (DTI) ratio. And lenders may consider your DTI ratio when reviewing future credit applications.
Opening a new credit card could also help you:
Does pre-approval for a credit card lower your credit scores?
Pre-approval offers can help you explore your options before you apply for a new credit card. The good news: 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 that’s because receiving a pre-approval offer often means you have a good chance of being approved for that specific card.
Focusing on applying for cards you’re pre-approved for could help you avoid application rejections. You can use tools like Capital One’s pre-approval tool to check your potential eligibility without hurting your credit scores.
What to consider before applying for a new credit card
It’s hard to pinpoint exactly how opening a new credit card could impact your credit scores. But responsibly using a new card could give you a credit-building opportunity with lots of benefits.
Introductory offers, rewards programs, interest rates and eligibility requirements are a few important factors to consider. The Consumer Financial Protection Bureau (CFPB) recommends only applying for the credit you need. So focusing on the credit card features best suited to you can help you narrow down your search. And looking at your pre-approval odds helps you explore your options before you apply—without affecting your scores.
The impact of opening a new credit card in a nutshell
When you open your new credit card, a small and temporary drop in your credit scores is possible. But using your card responsibly can help offset this impact. Making consistent on-time payments and avoiding high balances can have a positive impact on your credit scores over time.
Remember that you may be able to see whether you qualify for new credit before triggering a hard inquiry. Get pre-approved for a Capital One card quickly and easily with no impact to your credit scores.