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How Does Opening a New Credit Card Affect Your Scores?

You’ve probably heard it said that applying for a new credit card can have some negative effects on your scores. In addition to the “hard pull” credit inquiry that will likely result in a small score penalty, the age of your credit can be dragged down by a new account. Well, this week, I got to see first hand how temporary these minor hits can be and how opening a new card really impacts your credit score.

Before I get into it, I need to make clear that these are just my personal experiences — as they say, your mileage may vary. With that disclaimer out of the way, let me explain exactly how my credit cards were affected by my new credit card.

Last Thursday, I ended up applying and getting approved for the Uber Visa. When that happened,  my Transunion score dropped by six points according to Credit Karma. That dip was to be expected but what surprised me was what happened next.

While Barclay only pulled my Transunion report to make their decision, they reported my new account to all three major bureaus. Once this happened, my TransUnion score not only rebounded but exceeded what it was before and my other scores saw decent bumps as well. In fact, Barclay quoted my FICO at 800 in their first update to me, but that rose to 811 in their next update. The reason for this has to do with how different credit factors are weighed under the credit system.

Although credit inquiries and age of credit do affect your scores, these only represent  10% and 15% of your score respectively. Meanwhile, my credit utilization — which makes up 30% of your score — decreased overall since I now have a few thousand extra dollars in available credit. So, while my scores may dip a bit when I actually start using my card (the current $0 balance is boosting my utilization), it seems I may come out ahead on this one.

The moral of the story is, because of how your credit scores are calculated and the factors that go into them, applying for a new credit card may not affect your credit scores the way you’re expecting. If my experience is anything to go by, you may see a small dip to begin with but see benefits overall. The key is just to continue to your good credit habits with your new card, including making timely payments and keeping your utilization low.

Also published on Medium.

Other Articles by Kyle Burbank