Generally, credit card applications trigger “hard” inquiries on your credit report, which, unlike “soft” inquiries, can affect your credit score. That said, some scores go unaffected. This guide can help you get a better sense of the potential implications of a new credit card application on your score.

  1. Hard Inquiries vs. Soft Inquiries
  2. FICO® Credit Score Basics
  3. New Applications — What to Watch For
  4. Apply for Credit When You Really Need Credit

1. Hard Inquiries vs. Soft Inquiries

Whenever you apply for a mortgage, credit card or any other kind of loan, your lender will send a request for information to a credit bureau to verify your creditworthiness. This request is called a “hard inquiry,” or “hard pull.”

But a hard inquiry is not the only kind of credit inquiry. A bank will make a “soft inquiry” about your credit history when, for example, it is deciding whether you are eligible to receive a pre-screened credit card offer. That said, once you formally apply for your pre-screened offer, the hard inquiry will follow.

Soft inquiries also occur when you apply for a new bank account or when someone — let’s say, a prospective employer—runs a background check on you. Soft inquiries will not affect your credit score in any way.

A hard inquiry might affect your credit score, but only in certain cases. For some people it might lower their score, while others’ scores may be unaffected. We can’t predict with certainty how a new hard inquiry will affect one particular person, simply because there are too many other variables in the calculation of a FICO® Credit Score.

To better understand your chances of being hurt by a hard inquiry, we need to go to the primary source.

2. FICO® Credit Score Basics

FICO® Scores are calculated based on the following categories for the general population:

  • Payment History: 35%
  • Amounts Owed: 30%
  • Length of Credit History: 15%
  • Credit Mix in Use: 10%
  • New Credit: 10%

The importance of these categories may vary for different credit profiles.

As you can see, the first two categories, “Payment History” and “Amounts Owed”, typically have the greatest impact. Payment History is fairly obvious — being a responsible borrower and paying on time, all the time are the best practices. So what is Amounts Owed?

Amounts Owed is what credit professionals call a credit utilization ratio. It calculates the degree to which you are using your available credit. For example, if all your credit card lines amount to $20,000 and your debt across all of them is $2,000, your utilization ratio is 10 percent, which might be considered pretty good. However, if you owe $10,000, while your credit lines remain at $20,000, you are now utilizing a larger percentage of your available credit, 50 percent, which may be viewed by a lender as a higher risk.

You can check your FICO® Score online for free with the Discover® Credit Scorecard**.

3. New Credit Applications — What to Watch For

New Credit — one of the categories that make up your score — is where hard inquiries come into play. Note that this portion of your score only amounts to around 10 percent of the total scoring, but is still an important factor.

Still, new credit applications are worth your attention. If you have a short credit history, you should be careful not to open too many new accounts too fast. Slow and steady wins the race.

However, if you have a long and established credit history, your FICO® Score may be affected differently. It doesn’t mean that a hard inquiry can’t affect your score, but there are other factors in play. Since you have already established your Payment History and Length of Credit History, opening new accounts might change your credit utilization ratio. How?

Say you owe $2,000 across three credit cards with a total credit line of $8,000. That’s a 25 percent utilization ratio. If you get approved for two new credit cards with a $2,000 line each, your total credit will increase to $12,000, and your utilization ratio will decrease to 17 percent. While it may sound like a good idea, just remember that responsible spending under these credit limits is important for overall credit health.

4. Apply for Credit when You Really Need Credit

Nonetheless, don’t try to trick the system. Most credit and financial professionals are very clear on one thing — don’t apply for credit that you aren’t going to use. That means, don’t apply for a credit card only to help your score. Only apply when you have a need and are able to manage new debt. If you are a responsible borrower with an established credit history who pays their bills on time, the rest will take care of itself.

Published November 16, 2015

Updated January 5, 2021


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