Credit cards come with a lot of benefits, including rewards and introductory annual percentage rate, or APR, offers that can help you finance a large purchase or get rid of existing credit card debt.
But before you can take advantage of a credit card’s features, you’ll need to go through the application process. While adding a new credit card to your wallet can potentially improve your credit in the long term, your credit score will first take a temporary hit from what’s called a hard credit check.
How applying for a credit card hurts your score
When you apply for a credit card, the credit card issuer conducts a credit check to determine your level of risk as a borrower. This credit check shows up as a hard inquiry on your credit report and will usually lower your credit score slightly.
The amount of points deducted from your credit score depends on your credit history and recent credit activity, according to Experian, one of the three major credit bureaus. Most consumers with good credit will see their scores drop less than five points after a hard credit check, per FICO, one the main scoring models used by lenders.
If you apply for only one credit card and you have a history of good credit behaviors, your credit score shouldn’t drop much. However, if you apply for multiple credit cards in a short amount of time and have negative marks in your credit history, the negative impact on your credit score could be more significant. FICO could consider hard inquiries on your credit reports when calculating your score for up to 12 months.
Also keep in mind that hard inquiries can stay on your credit report for up to two years, according to credit bureau Equifax. The impact of a hard inquiry on your credit score itself may be relatively short-lived, but other creditors who access your reports can still see all hard pulls made during the past 24 months and might take that information into account when making a decision about your application.
Why does applying for a credit card hurt your credit?
When you apply for a new credit card, the lender has to decide how risky a borrower you are before approving you for a line of credit. One of the ways it determines your creditworthiness is through a hard inquiry, which allows a creditor to check your credit reports and lets other lenders know how frequently you request to borrow money. That request signals you may not have enough money to cover your debts so you need additional credit -- whether it’s true or not -- which is why the hard inquiry dings your credit score.
Hard inquiries stay on your credit report for up to two years, but your credit score should recover from the dip much quicker -- typically within a few months.
Does preapproval for a credit card lower your credit scores?
If you’ve been browsing new credit cards, you may have noticed preapproval offers. In exchange for some basic information, you can get an idea of your approval odds for a credit card. For example, most credit card preapproval forms ask for your name, your address, your income, how much you pay for housing each month and the last four digits of your Social Security number.
Preapproval only results in a “soft inquiry” on your credit reports. This kind of inquiry lets the card issuer get a general idea of your creditworthiness but doesn’t affect your credit score like a hard inquiry does.
While preapproval offers can give you a good idea about how likely you are to be approved, they don’t guarantee approval. Once you’ve been preapproved, you’ll still need to fill out a formal credit card application and undergo the required hard credit inquiry.
Does a credit card denial hurt your credit score?
Getting denied for a credit card won’t lower your credit score. What typically lowers your score is the hard credit check during the application process. If you’re denied for a credit card and then apply for another right away, you’ll have two hard credit inquiries on your credit report. Each hard inquiry can result in another ding to your credit score.
A new credit card can also help your credit score -- if you use it right
While the application for a credit card might ding your credit score slightly, responsibly using a credit card is the easiest way for most people to build good credit.
Payment history
Payment history -- whether you pay your bills on time -- is the biggest factor in most credit scores. Every month, credit card issuers report your account activity to the three credit bureaus. That’s why it’s important to pay your credit card bill on or before the due date. Paying your bill on time and in full can also save you money by helping you avoid interest charges and late fees. But even if you can’t pay your full statement balance, you should make sure you’re at least paying the minimum payment by the due date.
However, missing a payment or paying late can hurt your payment history and lead to a negative effect on your credit score after your issuer reports it.
In this sense, getting a new credit card can be a double-edged sword. You’ll have another credit card bill due each month, giving you more opportunities to make on-time payments and build your credit, or miss payments and tank your score.
To ensure that your new card helps rather than hurts your credit, don’t charge more than you can afford and consider setting up automatic payments to avoid accidentally missing a payment.
Credit utilization
Additionally, adding a new credit card or increasing your credit limit will reduce your credit utilization ratio, assuming your spending remains the same. Your credit utilization ratio is the percentage of your available credit that you’re currently using.
For example, if you have one credit card with a credit limit of $5,000 and you owe $1,000, you’re using 20% of your credit. If you open another credit card with a $5,000 credit limit but your balance across both cards stays at $1,000, your credit utilization ratio would drop to 10%. For the best results, experts suggest keeping your credit utilization ratio at 30% or less.
Age of credit accounts
Another factor that impacts your credit score is the length or age of your credit history. The best way to help your score in this category is by having multiple lines of credit you use responsibly for the long haul. A new credit card may not help you increase the average length of your credit history at first, but your credit history will improve the longer you keep the account open.
What to consider before applying for a new card
Here are several important considerations to keep in mind before you submit a new credit card application:
- Past credit use: Make sure you’re disciplined enough to keep up with new credit card accounts and another monthly payment before you apply. If your past use of credit has been problematic, you may want to simplify your finances and skip getting a new card.
- Purpose: Only apply for new credit for a concrete reason, whether you need access to short-term financing via an introductory APR offer or you want to earn a generous welcome bonus.
- Reward requirements: Speaking of welcome bonuses, make sure you can meet the minimum spending requirement via normal spending. If you have to buy stuff you don’t need or spend more than you can afford to earn a bonus, you’re not really getting ahead.
- Timing: Applying for too many credit cards too quickly and getting rejected can leave you with a “wasted” hard inquiry and nothing to show for it. Ideally, you’ll only apply for a new credit card account a few times per year. Try to wait at least three months between credit applications.
For more, here are the best rewards credit cards for 2023 and the best credit cards for fair and average credit.
Editors’ note: An earlier version of this article was assisted by an AI engine. This version has been substantially updated by a staff writer.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
