There has been a lot of information that’s swirling around on the internet lately, some of it right, some of it wrong, surrounding credit scores. I’m creating this Credit Myths series as a resource for some of the more commonly asked questions about credit scores.
Is My Credit Score Going to go Down by Opening up a Credit Card?
Opening a new credit card can have both positive and negative effects on your credit score, depending on how you manage it. In most cases, your score may dip slightly at first, but this is usually temporary.
When you apply for a credit card, the issuer performs a hard inquiry on your credit report. This inquiry may lower your score by a few points, but the impact typically fades within a year. Multiple applications in a short period can compound this effect and signal financial risk to lenders.
Another factor is your average age of credit accounts. Adding a new card lowers the overall age of your credit history, which can reduce your score slightly. That said, this factor matters more for people with limited credit histories than for those with many established accounts. If you have a new or bad credit history, you might benefit from a credit building service like this one.
On the positive side, opening a credit card can actually improve your credit utilization ratio, which is the amount of credit you’re using compared to your total available credit. For example, if you add a card with a $5,000 limit and keep your balances low, your utilization percentage drops, which may boost your score over time.
The long-term impact depends on how you use the card. Paying on time, keeping balances low, and avoiding unnecessary applications will likely strengthen your credit. On the other hand, missed payments or carrying high balances can hurt it.
Yes, your score might go down slightly when you open a new credit card, but with responsible use, the long-term benefits usually outweigh the initial dip. A new card can become a valuable tool for building and improving credit if managed wisely. As always, it’s important to keep track of your credit with a credit monitoring service.