How many points does your credit score go down when opening a new credit card?

The Minor, Temporary Dip: How Opening a New Credit Card Affects Your Score

Worried about the hit your credit score takes when you open a new credit card? While applying for new credit does trigger a hard inquiry, the impact is often less dramatic than many imagine. It’s a small, temporary dip, usually less than five points, and quickly rebounds as you manage your credit responsibly.

Here’s a breakdown of why your score might dip and what it really means:

• Hard Inquiries: When you apply for any form of credit, the lender checks your credit report. This is called a hard inquiry, and it’s one of the factors considered in your credit score calculation. It signals to potential lenders that you’re seeking credit. However, the impact of a single hard inquiry is minimal, typically less than five points. Furthermore, multiple hard inquiries for the same type of credit (like auto loans or mortgages) within a short period (usually 14-45 days) are often treated as a single inquiry by scoring models, recognizing that you’re likely rate shopping.

• Your Overall Credit Profile: The impact of a new credit card application varies depending on your overall credit health. If you have a long and established credit history with few inquiries, the impact will be negligible. Conversely, if you have a short credit history or several recent inquiries, the impact might be slightly more noticeable, although still generally minor and temporary.

• The Bigger Picture: While the small, initial dip is worth noting, the long-term impact of opening a new credit card can be positive. A new card can increase your available credit, lowering your credit utilization ratio (the amount of credit you’re using compared to your total available credit). A lower utilization ratio is generally beneficial for your credit score. Responsible use of the new card, including paying your bills on time and keeping your balances low, will further contribute to a healthy credit score over time.

In short: Don’t let the fear of a few points deter you from opening a new credit card if it aligns with your financial goals. The impact on your score from a single hard inquiry is generally minor and temporary. Focus on responsible credit management, and the potential benefits of a new card, such as increased available credit and building a stronger credit history, will outweigh the small initial dip.