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Why Did My Credit Score Drop After Opening a New Credit Card?

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Opening a new credit card can be an exciting experience. You probably applied for the card to get rewards, a sign-up bonus, or some other perk. You may have noticed, though, that your credit score went down soon after you got the new card. It can be scary, but it’s normal for your score to drop for a short time when you open a new account.

In this article, I’ll explain why your credit score dropped after opening a credit card, how much it’s likely to fall, and how long it will take to recover. You’ll also learn some steps you can take if your score drops more than expected.

Why Does Your Credit Score Drop When You Open a New Card?

There are a few main reasons your credit score may decrease after you open a new credit card

Hard Inquiry

When you apply for a new credit card, the issuer will perform a hard inquiry on your credit report to evaluate your application. This hard inquiry will show up on your report and can cause an immediate drop in your score.

There is a bigger effect on your credit score from hard inquiries if you have few accounts and a short credit history. For people with good credit and a long history, a new inquiry may only bring down their score by a few points.

Lower Average Age of Accounts

The average age of your credit accounts is factored into your credit score calculation When you open a new credit card, you immediately lower the average age of your accounts This can cause a slight dip in your score, especially if you don’t have many other longstanding accounts.

For example, if you have one credit card open for 5 years and you open a new card, your average age of accounts drops from 5 years to 2.5 years. However, the impact lessens over time as the new account ages.

Higher Credit Utilization

You’re using a certain amount of your available credit at any given time. This is called your credit utilization rate. Most of the time, a lower utilization rate is better for your credit score.

When you open a new credit card, it raises your total credit limit. But if you charge purchases to the new card before paying it off, your credit utilization will temporarily increase because you have higher balances reported across a higher total limit.

How Much Will Your Credit Score Drop?

The exact amount your credit score drops after getting a new credit card depends on your individual credit profile and history. However, here are some general guidelines:

  • If you have little or no credit history, your score could drop by 10 to 30 points, or even up to 50 points.

  • With an Established Credit History: Most people will see a dip of less than 20 points after opening a new card.

  • With an Excellent Credit Score: Your score may only fall a few points after a new account. The higher your starting score, the less impact inquiries and new accounts have.

  • Applying for Multiple Cards: If you apply for several cards within a few months, you may see a larger cumulative drop of 50 points or more. Space out applications over time.

In most cases, the credit score drop is temporary and your score will start to recover within a few months as long as you continue practicing good credit habits.

When Does Your Credit Score Recover After Opening a Card?

Your credit score typically recovers from the initial new account dip within 6 months, if not sooner. Here is a general timeline:

  • 1-3 Months: Your score starts to bounce back after the hard inquiry ages 30+ days. Utilization also improves as you pay off card balances.

  • 3-6 Months: By 6 months, your score has largely recovered as the hard inquiry impact lessens and your new account ages. Your utilization and payment history are also more established.

  • 6-12 Months: Within a year, your credit score has often fully recovered and potentially even improved from having an additional account in good standing. The inquiry falls off your report after 12 months.

The recovery timeline can vary based on your specific credit situation. For example, if you have a short credit history, it may take longer to rebound compared to someone with an established 20-year credit profile.

What to Do If Your Credit Score Drops More Than Expected

Seeing your credit score decrease by more than 20-30 points after getting a new credit card is not typical. Here are some steps to take if your score unexpectedly drops more:

  • Check for any errors on your credit report that may have led to the score drop. Dispute any inaccurate or fraudulent information.

  • Review your credit card statements to make sure you’re not carrying high balances, missing payments, or accruing interest charges that could impact your score.

  • Hold off on applying for more new credit for 6-12 months so your score has time to stabilize and recover from the new account opening.

  • Consider calling your card issuer to explain the situation and request that they reconsider another hard pull. They may be willing to use your existing credit data instead.

  • Build positive credit history by maintaining low card utilization and making all payments on time. This will help offset the new account impact over time.

Best Practices for Minimizing Score Drops

To reduce the credit score impact whenever you open a new credit card or loan, keep these tips in mind:

  • Space out credit applications by 6-12 months to avoid excessive hard inquiries.

  • Reduce card utilization before applying and avoid charging large purchases right away.

  • Consider requesting a credit line increase on current cards first to lower utilization.

  • Focus on maintaining positive payment history above all else. One late payment can hurt more than a new account.

  • Opt to replace an old card instead of opening a completely new account when possible.

  • Weigh the benefits of getting a new card versus short-term score drops. Is it worth it?

The Takeaway

It’s very common for your credit score to dip a small amount after getting approved for a new credit card. This temporary drop is normal and will recover within 6 months or less as long as you continue practicing good credit habits. However, monitor your credit reports and scores closely. If your credit score decreases more than expected, take steps to understand why and improve it going forward. With a little time and positive behavior, opening a new account won’t hurt your credit for long!

why did my credit score drop after opening a credit card

You missed a credit card payment

Because your payment history is the most important factor that determines your credit score (making up 35% of your FICO score calculation), missing a credit card payment will have an immediate negative effect on your score. Needless to say, lenders and issuers care a lot about whether youve paid your past credit accounts on time because they indicate your risk.

According to FICO data, a 30-day missed payment can drop a fair credit score anywhere from 17 to 37 points and a very good or excellent credit score to drop 63 to 83 points. But a longer, 90-day missed payment drops the same fair score 27 to 47 points and drops the excellent score as much as 113 to 133 points. In other words, the higher your credit score, the greater the negative effect will be.

How quickly your score bounces back after a missed payment varies depending on your credit history and your payment behavior after you miss a payment. If you jump back on track quickly after, its likely your score will start improving along with your good payment history. A history of on-time payments is vital to a good credit score, and its even better if you can pay them in full.

You applied for a new credit card

Card issuers pull your credit report when you apply for a new credit card because they want to see how much of a risk you pose before lending you a line of credit. This credit check is called a hard inquiry, or “hard pull,” and temporarily lowers your credit score a few points. Hard inquiries remain on your credit report for two years, but FICO (which most lenders use) only considers inquiries from the last 12 months when calculating your credit score.

But hard inquiries on your credit report arent necessarily bad when they happen in moderation. After all, applying for credit cards is a great first step in building credit. When you use credit cards correctly — by charging purchases and paying them off in full by the due date — they can help increase your credit score. If youre looking to build credit, consider the Petal® 2 “Cash Back, No Fees” Visa® Credit Card, which offers cash back, or the Capital One Platinum Credit Card that is designed for average credit applicants.

To reduce the number of unnecessary hard pulls on your credit report, check if you qualify for a new card by using issuers preapproval or prequalification offers. These wont guarantee that youll be approved for the specific credit card, but theyll give you a good idea.

When it comes to actually applying for new credit products, be sure to spread out your credit card applications over time. Only apply for a new credit card every three months, and maybe wait even longer between applications if you have a lower credit score.

The Surprising Reason Your Credit Scores Dropped After Opening a Credit Card!

FAQ

Why does my credit score drop when I open a new credit card?

Applying for a new credit card also triggers a hard inquiry, which involves a lender looking at your credit reports. According to credit-scoring company FICO®, a hard inquiry can cause a slight drop in your credit scores. Multiple hard inquiries in a short period of time can have a more pronounced impact.

What credit score does an 18 year old start with?

An 18-year-old doesn’t start with a specific credit score. Instead, until they start using credit and building a record, they will either have no credit history or be thought of as “credit invisible.”

What is the 2/3/4 rule for credit cards?

The 2/3/4 rule is a credit card application restriction specifically used by Bank of America. It limits the number of new credit cards you can be approved for within certain timeframes.

Why did my credit score drop 30 points after getting a credit card?

Another situation when your score might drop is when you apply for a loan or new credit card and the lender performs a hard inquiry. Each inquiry could cause your score to fall by five points or more, and it may stay on your credit report for up to two years.

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