How Applying For A Credit Card Impacts Your Score
Many things impact your credit score, and applying for a credit card is one of them. We’ll explain how applying for a credit card impacts your score.
There are several factors that impact your credit score, and applying for a credit card is one of them. We’ll explain how applying for a credit card affects your credit rating, if applying for multiple credit cards affects your credit, and if it’s a good idea to apply for multiple credit cards at once.
What impacts your credit score
Just as several factors make up your credit score, several factors affect your credit score both negatively and positively:
Negative impacts on your credit score
High utilization, more than 30%
Late or missed payments
Accounts sent to collections
Filing bankruptcy
Closing a credit account
Applying for credit cards or loans
Incorrect information on your credit report
Positive impacts on your credit score
Paying down balances
Increasing your credit limit
Opening a new credit card
Having inaccurate information removed from your credit report
How applying for a credit card affects your score
You’ll notice that applying for a credit card has a negative impact on your credit score but that being approved for a credit card improves your score! It’s one of the many strange things about credit scores, so you can understand why certain credit myths persist!
When you apply for a credit card or a loan, the creditor pulls your credit card and uses that information to decide whether or not to approve you. If they deem you an acceptable credit risk, you’ll be approved. This credit check is known as a hard pull. Checking your own credit does not impact your credit score and is known as a soft pull.
This hard pull does impact your score negatively, but not much and not for long. Your score will drop by five points or fewer. It will stay on your credit report for two years, but the impact on your score will only last about a year. Another component of your credit score is the length of credit history, how long you’ve had credit. When you open a new credit card, it brings down the age of your credit history a little bit, and this too lowers your credit score.
In better news, taking out a new credit card can help increase your credit score. A new card will lower your utilization. The most significant factor in your credit score is payment history. Paying the new card on time each month gives you an additional on-time payment.
And a new credit card may improve your credit mix, another factor in your score. For the purpose of your credit report, there are two broad categories of credit, revolving, and installment. Revolving accounts are those you can charge to, pay off, and charge again, like credit cards. Installment credit accounts are those you take out once, pay each month, and eventually pay off, and the loan ends, like a mortgage or auto loan. If you mainly had installment accounts, opening a credit card, a revolving account can improve your score.
Applying for credit cards without affecting your credit score
Without a hard credit check, there is no way to apply for a credit card, so any application will affect your credit score. But if you’re going to take the hit by applying, you want to increase the odds of getting approved.
Before applying, check your credit score. Again, doing so won’t hurt your score. Most credit cards will post the minimum credit score required for approval. If you don’t have the necessary score, don’t bother applying. There are plenty of credit cards available for people with little credit history or less than ideal credit scores, including secured credit cards.
There is a theory called “app-o-rama.” It says that if you apply for several cards at once, each card won’t see the other applications on your credit report. This may be true, and people typically do it to get a lot of sign-up bonuses from various credit cards. But each application will still show up on your credit report eventually.
Build credit with Upwardli
Upwardli was created to help new immigrants to the U.S. navigate our financial system and to help them partner with financial services providers that understand their unique challenges and needs. But we can help anyone build their credit quickly. Upwardli is here to help you on your credit journey.
