Too many or just right? Here’s how that new credit card affects your credit


A newly embossed credit card can raise your spirits just like a decadent dessert or a sunny spring day. But is the shiny new card feeling worth the impact on your credit?

RELATED: Numbers don’t lie: 5 things to know about your FICO score

The answer depends on your spending history, borrowing goals and ability to handle spending power, according to credit experts like NerdWallet and Experian. 

That new credit card will have an immediate impact on your FICO score.

Applying for a credit card has an immediate impact on your FICO, or credit score, because the credit card issuer will check your credit report. 

This generates a "hard inquiry" that can cause your credit score to drop by a few points, according to Experian. "It's called a hard inquiry because it represents a potential new debt that doesn't yet show in the report as an account," the credit bureau noted. "That unknown debt represents possible risk." Each hard credit inquiry will stay on your report for two years, but most people regain the points within about six months of a credit card application. "But if your credit score was poor to begin with, those points might really count," NerdWallet noted.

It does matter how many cards you accumulate in short period of time.

Avoid applying for a new credit card in the three to six months before borrowing for a major purchase or mortgage. That way you can keep your score at its highest to get the best possible interest rate for the loans.

Applying for multiple credit cards in a short period of time isn't like applying for multiple home loans, because that is a situation where the credit bureaus expect you to comparison shop.

Instead, each credit card application incurs a separate "hard inquiry" and contributes to your credit-risk rating. "Several different inquires for new plastic in a short span of time will cause your credit score to drop significantly," according to NerdWallet. The blog encouraged those who have already applied for too many credit cards at once to realize their credit scores will bounce back. "Just be sure you pay on time and keep balances low and wait six months to a year before you apply for another one."

To estimate the impact of credit application scenarios without incurring hard inquiries, check out NerdWallet's free debt calculator and credit score simulator.

You may notice a dip in your score - but it could be brief.

According to Experian, when a new account opens, you may notice a dip in scores when it first appears in your credit report. "However, if you keep your balances low and make all your payments on time, your scores should rebound," the credit bureau noted.

Myths about new credit cards and your credit score

The whole topic of new credit cards and how they affect credit involves many myths, according to the Magnify Money blog. Avoid these sensible-sounding steps and use your credit cards in a way that will help build your credit score:

  • Myth: Just get prepaid or debit card instead of a credit card, since they don't impact your credit score. "There is a common misconception that carrying a credit card will ultimately lead to damaging credit card debt," Magnify Money noted. "However, for the responsible individual, a credit card offers one of the easiest ways to establish and build credit history."
  • Myth: Don't pay off your credit card on time and in full, since carrying a balance imoroves your credit. "If you're carrying a balance on your credit card and paying the minimum month-to-month because you heard you should, you aren't damaging your score nor are you improving it. But you are losing money each month in interest to your lender. Why throw away money?"
  • Myth: Only have one credit card. "Utilization" or "amounts owed" accounts for about 30 percent of your credit score and you want to keep yours as low as possible. "One way to make sure that happens is to have a number of credit cards open. That increases your total limit available, making it easier to keep your utilization low,” according to Magnify Money.


Reader Comments ...


Next Up in Business

The Justice Department is suing AT&T to block its $85 billion bid for Time Warner
The Justice Department is suing AT&T to block its $85 billion bid for Time Warner

The Department of Justice is suing to block AT&T's $85 billion bid for entertainment conglomerate Time Warner, setting the stage for one of the biggest antitrust cases to hit Washington in decades. The suit is fraught with legal and political risks for both sides. Several Democrats have expressed concern that antitrust officials could be seeking to...
Business stories of the week: Amazon, 2018 priorities, Phipps Plaza
Business stories of the week: Amazon, 2018 priorities, Phipps Plaza

The week had no shortage of business headlines among Atlanta area companies – or perhaps companies that want to become Atlanta area companies. From the Amazon second headquarters search to major development projects, here are some of the big business headlines you might have missed from the past week. Georgia and Atlanta area economic development...
More job cuts coming to Atlanta as part of Coca-Cola restructuring
More job cuts coming to Atlanta as part of Coca-Cola restructuring

Atlanta-based Coca-Cola plans to cut an additional 179 jobs in its hometown as part of a broader restructuring the beverage giant announced earlier this year. In filings with the Georgia Department of Economic Development’s Workforce Division, Coke identified layoffs at three corporate offices in the city effective by the end of December...
Atlanta’s Phipps Plaza makeover plan shifts into overdrive
Atlanta’s Phipps Plaza makeover plan shifts into overdrive

The reinvention of Phipps Plaza into a mixed-use entertainment and shopping complex has been in the works for more than a decade. But the announcement Tuesday of a $200 million-plus expansion, including a flagship Nobu hotel and restaurant, will take that the makeover to a new level, officials with mall owner Simon hope. In Nobu, Phipps will add...
4 of the best ways to turn your home into a cash cow
4 of the best ways to turn your home into a cash cow

Your house is a large expense with many associated costs like a mortgage payment, insurance, maintenance and more. It provides a roof over your head, of course, but since it usually costs you money each month, why not put it to work for you and earn some cash in the process? The following are four ways your house can make you money: If you're planning...
More Stories