How much will my credit score go down if I get a new card?

How Opening a New Credit Card Affects Your Credit Score

Getting a new credit card can be enticing, especially if you’re looking to build or improve your credit. However, it’s important to understand how it can impact your credit score.

Initial Impact of Opening a New Card

When you open a new credit card, it’s recorded as a hard inquiry on your credit report. Hard inquiries can cause a temporary dip in your credit score, typically around 5 to 10 points. This dip is usually short-lived and will recover within a few months.

Impact of Credit Utilization

The biggest factor that can affect your credit score after opening a new card is your credit utilization. Credit utilization refers to the amount of credit you’re using compared to your available credit limit. Using more than 30% of your available credit is considered high utilization and can significantly impact your score.

If you open a new card with a high credit limit, it can increase your overall credit usage even if you don’t spend more than you normally would. This can lead to a drop in your credit score.

Other Factors to Consider

In addition to credit utilization, other factors that can influence the impact of opening a new card include:

• Your credit history: People with a long and positive credit history will experience less of a score drop than those with limited or negative credit.
• The type of card: Opening a secured credit card, which requires a cash deposit, typically has less of an impact on your score than opening an unsecured card.
• Your debt-to-income ratio: If you have a high debt-to-income ratio (the amount of debt you have compared to your income), opening a new card can further increase your ratio and negatively affect your score.

Conclusion

Opening a new credit card can slightly lower your credit score initially due to the hard inquiry. However, the most significant impact comes from heavy utilization of its available credit. By keeping your credit utilization low and maintaining a positive payment history, you can mitigate the negative effects of opening a new card on your credit score.