Before you make another credit card application, first you should know how opening a new credit card is going to affect you. Opening a new credit card might boost your credit score if this is your first credit card. In other situations, opening a new credit card could hurt your credit score rather than help it.
Opening a new credit card lowers your credit age. Fifteen percent (15%) of your credit score is based on your credit age. There are two factors to your credit age. First, there’s the age of your oldest account and the average age of all your accounts. Opening a new credit card will lower the average age of all your accounts, especially if it’s been awhile since you last opened a credit account.
You’ll get another inquiry to your credit report when you open a new credit card. Simply applying for another credit card places an inquiry on your credit report. It doesn’t matter whether you actually open the credit card or not. Inquiries count 10% of your credit score and an additional inquiry should cost you a few credit score points. It may not sound like much but it could mean the difference between a good credit score and a bad one.
Opening a new credit card could raise your credit utilization. Be careful when you open a credit card and make a charge on it the same day. If you charge a balance that takes up much of your credit limit, your credit score will take a hit. That’s because 35% of your credit score is based on how much of your available credit is being used. The more of your new credit limit you’re using, the more your credit score will hurt.
Opening a New Credit Card Isn't All Bad
In some cases, opening a new credit card can help improve your credit score. If you don't make any new purchases on your credit cards, including the new one, your overall credit utilization will drop and your credit score could increase.
You could get more points in the types of credit portion of your credit score, which is 10% of your score. Of course, this depends on the types of accounts you already have open and the type of credit card you open. Opening a new store credit card won't necessarily give you a boost in this area. But opening a new bank card can help, especially if you have only a few bank credit cards.
You should always open new credit cards on an as needed basis, rather than opening one to attempt to boost your credit score.
