Opening a new credit card account can often be a good way to improve your credit score. Yet sometimes adding a new credit card to the mix might set your credit score back instead—at least for a while.
This guide will help you discover how opening a new credit card can impact your credit score. You’ll also learn strategies that can help you choose the right credit card for your situation, along with steps you can take if you’re unable to qualify for an additional credit card right now.
There’s no universal answer to the question, “How does opening a new credit card impact your credit score?” Credit scores have many moving parts. In other words, there are many factors that can impact your credit score. And the way a new credit card affects your credit score could be quite different from the credit score impact someone else experiences.
Adding a new credit card account to your credit report could help or hurt you in the credit score department—and perhaps even do a little of both. Below are examples of different scenarios where the overall impact of a new credit card might be positive or negative.
Opening another credit card account does have the potential to be a positive move where your credit score is concerned.
A new credit card could:
All new credit obligations—credit cards included—have the ability to damage your credit score. Whether a credit card influences your credit score for the good or bad depends on numerous factors.
A new credit card could:
Before you can figure out what type of credit card may be best for you, you need to understand the condition of your credit. Your credit score isn’t the only factor that a credit card company will consider when you apply for a new account, but it’s an important detail. Credit scores help lenders assess the risk of loaning someone money.
Once you download your credit reports and credit scores, you’ll have a better idea of your overall credit health and credit score range. If your credit score is considered to be “good” or “excellent,” you’ll probably have many different credit card options to choose from. With “fair” or “bad” credit scores, however, your choices may be more limited.
You should avoid applying for credit cards that you’re unlikely to qualify for based on your credit. Otherwise, you may become frustrated if and when lenders deny your applications.
On a positive note, it’s still possible to open credit cards even with damaged credit or no established credit history. In these situations, a secured credit card may be worth considering.
It’s possible to earn a good credit score with one credit card or with many. The most important rule to follow in either situation is to always make your monthly payments on time. Late payments, even occasional ones, can cause severe credit score damage.
Multiple credit cards can also make it easier to maintain a lower credit utilization rate thanks to the additional credit limits those accounts provide. And anything you can do to keep your utilization rate down could work in your favor where credit scores are concerned.
In most cases, you should avoid closing old credit card accounts. Closing a credit card could increase your overall credit utilization rate. As a result, the account closure could have a negative impact on your credit score.
If you’ve already made the mistake of closing an old credit card, it might be possible to reopen the account after the fact. This helpful guide can walk you through the steps of asking a card issuer to reopen a closed credit card, and it provides tips on how to improve your chances of success.
If you can’t qualify for an additional credit card right now, don’t be discouraged. There are still alternative actions that might help you.
Checking your credit reports is easy and free. You can visit AnnualCreditReport.com to download your reports from all three credit bureaus (Equifax, TransUnion, and Experian) once every 12 months. These free reports are a right afforded to you under the Fair Credit Reporting Act.
It is worth pointing out that you can’t get a free credit score from this website. However, there are numerous websites that offer free credit scores in exchange for you agreeing to receive advertisements for financial products and services.
Once you have your credit reports and scores from the three credit bureaus, review them for errors. A recent Consumer Reports study found that 34% of consumers have an error on at least one credit report. If you find that one or more of your credit reports does contain mistakes, you can dispute those inaccuracies with the associated credit bureau(s).
Opening a credit card isn’t the only way to add positive credit history to a credit report. Even with a poor credit score or a lack of credit history, you may be able to use one of the following methods to add a positive trade line to your credit report.
Adding a new credit card could be an effective way to improve your credit score. Just remember, it’s the way you manage your new account that matters most.
Credit cards can be a powerful credit-building tool. At the same time, they can be a source of temptation for some. It’s critical to avoid overspending, late payments, and other dangerous behavior where credit cards are concerned.
Michelle L. Black is a leading credit expert with over 17 years of experience in the credit industry. She’s an expert on credit reporting, credit scoring, identity theft, budgeting and debt eradication. See her on LinkedIn and Twitter.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.
Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).
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