I Opened 2 New Cards in 2 Weeks. Here's What Happened to My Credit Score
Every credit history tells its own story.
There's a lot of information out there about credit scores and what you should and shouldn't do to maximize your score. Unfortunately, a lot of that advice is pretty vague, based on generalizations about what credit scoring models look for -- and what they don't.
So, while I can advise folks to avoid making late payments or to space out their credit card applications, I can't tell anyone exactly how many points they may lose should they decide not to take that advice.
That's where personal anecdotes can come in handy. For example, I recently added back-to-back new cards to my collection, opening two credit card accounts within a two-week period. In theory, there are a number of ways opening new credit cards can impact your scores. But what really happened? Let's take a look at how the potential implications compare to the real-life impacts to my credit scores.
The potential impacts
While we don't have access to the actual credit scoring models used by scoring agencies and lenders, we do know the basics of what goes into your score. Specifically, we know that your FICO credit score looks at five areas of your credit. We also know how those areas are weighted:
- Payment history (35%)
- Amounts owed (30%)
- Credit history length (15%)
- Credit mix (10%)
- New accounts (10%)
Opening a new credit card account can impact a few of these factors right from the get-go. To start, the application comes with a hard credit inquiry, which can ding you in the area of new accounts. The more hard inquiries you have, the more new inquiries will count against you.
Once the new account is opened, it has a couple additional impacts on your credit, one potentially good and one usually negative.
The potential positive: Your new card's credit limit gets added to your overall credit utilization calculation, which looks at how much of your available credit you use. Having more available credit could potentially reduce your utilization rate and improve your credit score.
The additional negative: A brand-new account means your average account age will decrease, which could cause your score to decrease as well. However, the older your credit history is, the less this should impact your scores.
As you can see, opening a new card can be a mixed bag when it comes to your credit score -- and that goes double when you open two new cards around the same time. So, how did I fare?
My real-life experience
Thanks to a host of credit cards that offer regular credit score updates, I can see exactly the impacts from my new accounts. I have to admit I was a bit surprised. Looking at the average of the scores from each credit bureau, the overall change in my credit score when my new accounts were reported? A meager three-point drop. Let's break it down to see why.
To start, let's consider the hard credit inquiries. Although your new card account will almost always be reported to all three credit bureaus, most issuers will only check your history with a single bureau when you apply.
I got a little bit lucky here, as the two credit card issuers checked two different credit reports when they ran my credit -- one looked at my Experian report, while the other checked my TransUnion report. This meant only one hard inquiry was added to each report. And since any given credit score is based on the information from just one credit bureau, it was as if I only applied for one card, not two. This meant the credit score damage was minimal.
On to utilization. As far as my utilization rate was concerned, well, there was little score impact. I keep low balances as a matter of course, so the added credit line didn't make much difference.
That leaves my average account age. If I had only one or two existing card accounts, opening two brand new accounts could have significantly reduced my average account age. As it happens, however, my existing card collection has rolled over into the double digits, and many of my accounts are at least a few years old. This meant that my account age didn't drop all that much -- which also helped protect my credit scores overall.
Your credit history mileage may vary
As we saw, opening a new credit card account -- let alone two back to back -- could have decreased my credit score in a number of ways. In the end, the fact that I already had a well-established credit history that was in great shape helped minimize the impacts of my two new cards.
In other words, just because my credit score weathered the new accounts well doesn't mean that everyone will experience the same minor impacts. Had I already had more hard inquiries, or if my credit history was less robust, the ramifications could have been much worse.
That's why it's important to consider your personal credit history before opening any new credit accounts -- and definitely before opening multiple accounts. You may need to space out your credit card applications to reduce the impact of hard inquiries or wait for your existing accounts to age a bit before applying for new cards.
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