Per FICO, opening a new credit card account can impact your credit score in two primary ways.  First, the card issuer will likely pull your credit report as part of their review process.  That inquiry can lower your score – but generally has a small impact on your FICO® Scores  (for most people, this means less than five points off their FICO® Score). In addition, the issuer will report the newly opened account to the credit bureaus which impacts length of credit history characteristics.   The exact impact depends on the applicant’s unique credit history. Over time, though, getting a credit card can help build a better credit history if you pay it on time and carry minimal debt (basically with responsible use). As you build up a history of responsible behavior, and it’s reported to the major credit bureaus, you can be on your way to a better financial future.

Those are far from the only ways that opening a credit card can potentially impact your credit score – see below for more details.

1. Opening a Credit Card to Increase Your Available Credit

2. How Opening a Credit Card Could Hurt Your Credit Score

3. Benefits of a Good Credit History

1. Opening a Credit Card to Increase Your Available Credit 

Responsible handling of your finances, potentially with the opening and use of a credit card, can help build a good credit history over time. For example, while FICO® Scores are made up of several components, one important category is amounts owed, which typically makes up 30 percent of your overall score. This component addresses your debt-to-credit ratio, or utilization rate. Essentially, it measures how much of the credit extended to you is being used and paid off. Per FICO, a low credit utilization rate will more positively affect your FICO® Scores than not using your available credit at all because it shows that you are capable of handling credit responsibly.

How many credit cards do you need to build credit? The answer depends on your credit utilization and how much credit you need, so consider the ratio of how much you spend compared to how much credit is available to you on your card, or cards. For example, opening a credit card may lower your debt to credit ratio. Say that you double your total credit lines available from $5,000 to $10,000 by opening a second card, but you simply spread out your current spending of about $1,000 per month across those two credit cards. This would improve your utilization ratio, meaning that you’re spending $1,000 out of $10,000 available to you, for a utilization of 10 percent instead of 20 percent when you had $5,000 available.

But remember, using more credit could make you less likely to pay back what you’ve borrowed. A high utilization ratio fits the profile of someone who might be “living on credit.” That’s a fiscally dangerous way to live, and a higher risk for potential lenders. Whenever possible, you should try not to use all your available credit — just let it help you build up and maintain your credit history.

2. How Opening a Credit Card Could Hurt Your Credit Score

Despite all of the ways that a new credit card can help your credit score, there’s always the potential for it to hurt your score under certain circumstances.

For example, if you were to open up several new lines of credit in a short period of time, you may see a drop in your FICO® Scores. Applying for several new credit cards could be seen as a sign of riskier spending, and the credit scoring formulas could penalize consumers for opening multiple accounts within a few months’ time.

Also, if having a new credit card account leads to incurring more debt, then your credit score also can suffer. And if having too many accounts causes you to make late payments, then that could hurt your credit score.

3. Benefits of a Good Credit History 

When you build a good credit history by using your credit card responsibly, it could open up an opportunity to get a credit card that provides a cashback rewards program. For example, some cards offer cash bonuses, while others offer cash rewards or miles, and many of these cards are available with no annual fee .

If you’ve got an excellent credit score, you may score a lower interest rate on your card, or have more reward options as issuers compete for your business. In short, having excellent credit gives you more choices. As you research credit cards, remember that the best cards tend to offer the best overall benefits that are most valuable to you, relative to the cost.

The Bottom Line

One of the keys to having an excellent credit score is to establish a history of paying your bills on time, and carrying very little debt. The next time you see a competitive offer for a credit card, you can consider how the application may impact your credit score when deciding whether to apply. And as you build excellent credit, you can start to reap the benefits in terms of more flexible personal financial tools.

Published September 14, 2017

Updated August 3, 2021

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