From unsolicited offers in the mail to the cashier offering you a 15 percent discount if you open a store card, people are constantly being bombarded by new credit card offers. As tempting as it might be to open a new credit card each time you’re offered one, you need to consider the impact it’ll have on your credit score.
Keep reading to see if opening a new credit card will mess up your credit score.
How Does Getting a New Credit Card Affect Credit Score?
The credit scoring model looks at the new credit you’ve applied for recently to calculate 10 percent of your credit score. If you apply for a lot of new credit in a short period of time, your credit score can fall a bit because you’re viewed as a riskier borrower.
In addition, a new credit card will lower the average age of your credit lines. For example, if you have two credit cards, one that’s been open for six years and one that’s been open for nine years, your average account age is 7 1/2 years. If you open a new card, the average age drops to five years. However, over time, your new card’s impact on your length of credit history goes down.
On the positive side, a new credit card increases your total available credit limit, which can help your credit utilization ratio. If you don’t carry a large balance on your new card, your credit utilization goes down. And, if you manage your new credit card well, it can help boost your credit score because you will accumulate additional positive payment history.
Time Frame for Effects
Credit inquiries remain on your credit report for about two years, but the impact of each inquiry decreases as time passes. For example, an inquiry from a month ago has a bigger impact on your credit score than an inquiry from 10 months ago. The FICO scoring model only includes inquiries in the past year when determining your score.
Should You Apply for a New Card?
When you apply for a new credit card, your credit score will likely decline a bit. If you’re planning on taking out a large loan in the foreseeable future, such as a car or auto loan, consider waiting to apply for the new credit card. But, if you don’t have any big loans coming up, as long as you manage your new card responsibly, you can improve your credit score over time.
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