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Show If you're thinking about opening a new credit card and are wondering whether it will help your credit score, the answer is yes—and no. Applying for a new card can initially lower your score because the card issuer will do a hard credit pull when deciding whether to approve your application. Further, a new account can potentially work against your scores as it will lower the average age of your accounts. On the other hand, a new credit card can help your credit utilization, which is an important factor in your scores. A new card can help you in the long run, especially if you keep it open for several years and make payments on time, but you may feel some short-term pain. How Does Opening a New Credit Card Affect Your Credit Score?First, let's look at how a new credit card might help you improve your credit score:
Now that you know the possible perks of opening a new credit card, let's consider some ways it might harm your credit:
The bottom line is that opening a new credit card might cause your score to dip initially. But over the long term, it can help you improve your credit history and raise your credit score. If you decide to open a new credit card, it's important to be strategic about how you use it. After all, you want the card to help you build credit and develop an excellent financial profile. Here are some ways to do that:
Should You Close Old Credit Cards?If you have an old credit card that you rarely use, you might think the best option is to get rid of it. After all, why keep an account you never touch? Reality is a little more complicated, though. When you close a credit card, you lose access to that credit line and your credit utilization can increase (since your total available credit will be lower). The overall age of your credit also drops, since that account no longer factors into your score. The result is that your score could actually decline in the months following your account closure. Because of that, you may want to keep your old accounts open if you plan to apply for new financing soon—a mortgage or car loan, for example. However, there are circumstances in which it may be best to close the account, particularly if you aren't applying for a new loan or card anytime soon. If your card has a high annual fee or high interest rate, you may want to close it in favor of
getting a more competitive card down the road. You might also want to close the account if you find that you're overspending on it and racking up more debt than you can afford. How to Improve Your Credit Without Credit CardsIf you don't want to open a new credit card, there are still ways to increase your credit score.
Whether you open a new credit card or not, there are always opportunities to establish a track record of responsible financial management. Being mindful of those opportunities will set you on the path to improving your credit score. Is it OK to open a lot of credit cards?There's no such thing as a bad number of credit cards to have, but having more cards than you can successfully manage may do more harm than good. On the positive side, having different cards can prevent you from overspending on a single card—and help you save money, earn rewards, and lower your credit utilization.
How much does your credit score go down when you open a credit card?That inquiry on your credit report can lower your score – but generally has a small impact on your FICO® Scores1 (for most people, this means less than five points off their FICO® Score).
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