The Sneaky Reason Your Credit Score Goes Down When You Open A New Card

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First, the bad news: Opening a new credit card does put a dent in your credit score. If you’re shopping for a new credit card, and wonder what actually happens to your credit score when you open a new card, there are a few things you should know. Temporary credit dings aside, there are also some potential perks to opening a new card down the road, so it’s important to weigh your options before you apply.

Jennifer Streaks, finance expert and author of Thrive … Affordably tells Bustle by email that applying for a credit card usually has minimal impact to your credit score. “Applying for a credit card allows the potential creditor to get a copy of your credit report,” Streaks says. This "hard inquiry" will show up on your credit report for around two years, but its impact will drop substantially after six months.

“Basically, apply for credit only when you need it, be aware of your debt to income ratio, and use credit wisely,” says Streaks.

But if you're still interested in looking into a new line of credit, there are options out there that won't ding your score, even temporarily. Streaks says, “A soft inquiry on your credit report occurs when you pull your own credit report or a lender is pulling your credit report to pre-approve you for an offer. Some credit cards will let you do a soft pull to see which one of their cards you will be pre-approved for. This is a good way to see in advance if you are likely to get approved. Pre-approval usually means you have an 80% chance of getting approved." If you don’t get pre-approved, don’t apply, and you “won’t have an inquiry on your credit report,” says Streaks.

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When it comes to the credit score game, there are some things you should know about applying for new cards, Pamela Capalad, CFP and founder of Brunch & Budget tells Bustle via email. “There are two credit score factors that are affected when you apply for a new credit card — 10% of your score is made up of applying for new credit. Every time you apply for a new credit line, your credit score takes a negative hit, even if you don't get approved for the card. The other factor that’s affected is your credit history.” Capalad says that 15% of your credit score is based on the average age of all your lines of credit. “As soon as you open a new credit card, that card's credit history is zero years [old], which brings down your overall average credit history and affects your credit score negatively.”

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So what’s a financially savvy credit card-seeker to do? “I usually recommend you wait to apply for new lines of credit once every 12 months,” says Capalad. “It takes between 12 to 24 months for a hard inquiry to be removed from your credit report.” Additionally, “It’s not possible to apply for a line of credit without resulting in a hard inquiry,” explains Capalad. “Applying for new credit sends a signal to other creditors that you're trying to borrow money, and, in theory, they question why you're applying for more debt. There are some situations, like shopping around for mortgage rates, when your credit doesn't take a hit every time you apply for a new mortgage — as long as you shop for rates within a 14-day window,” she says.

If you feel a little anxious about the idea of your credit score dropping when you apply for a new card, Capalad says to keep in mind that the dip in your score is temporary. And the older your new card gets, the more it helps your credit in the long run. If you’re shopping for a mortgage or a car, and you need your credit score to stay up while you secure financing, then wait a bit to apply for that new card, says Capalad. Otherwise, don’t worry too much about your score dropping a bit.

Correction: This article was updated on April 19, 2019, to reflect that Pamela Capalad, CFP, is the founder of Brunch & Budget.