How Does Opening a New Credit Card Affect Your Scores?

Home - Quick Tips - 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.

Author

Kyle Burbank

Kyle is a freelance writer and author whose first book, "The E-Ticket Life" is now available on Amazon. In addition to his weekly "Money at 30" column on Dyer News, he is also the editorial director and a writer for the Disney fan site LaughingPlace.com and the founder of Money@30.com.

Other Articles by Kyle Burbank

PayPal Launches "Moola Mania" Sweepstakes and Game

As a one-time eBay obsessor, I've been using PayPal for quite a long time. However, that usage has seemingly increased as of late — even in the face of competition from Apple, Venmo, Square Cash, and others. While I can't quite explain what's been leading me to click that PayPal button...

Frugal Valentine's Day Date Ideas to Save You Both Money

Ultimately what's important is making time to spend with your loved one and showing them how much you appreciate them. That said checkout these fun Valentine's Day ideas that won't break your wallet.

Don't Wait — Get Your Tax Return Done ASAP

While you'll still technically have a couple of months before you must file your 2017 tax returns, there are some good reasons not to wait. With that deadline drawing near, now is the time to get organized and get your taxes done. Hey — after you do, you'll have a whole year to slack off once again.

Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *